PAGENO="0001" BUDGET REViEW t7C/ / ~ ~ HEARINGS BEFORE THE COMMITTEE ON PUBLIC WORKS UNITED STATES SENATE NINETY-FOURTH CONGRESS FIRST SESSION FEBRUARY 2G, 27, MARCH 3, 4, AND 5, 1975 SERIAL NO. 94-114 Printed for the use of the Committee on Public Works * O7- U.S. GOVERNMENT PRINTING OFFICE ~O194 WASHINGTON: 1975 PAGENO="0002" COMMITTEE ON PTJBLIC WORKS JENNINGS RANDOLPh, West Virginia, Chairman EDMUND S. MUSKIE, Maine HOWARD H. BAKER, Jim., Tennessee JOSEPH M. MONTOYA, New Mexico JAMES L. BUCKLEY, New York MIKE GRAVEL, Alaska ROBERT T. STAFFORD, VermoRt- LLOYD BENTSEN, Texas JAMES A. McCLURE, Idaho QUENTIN N. BURDICK, North Dakota PETE V. DOMENICI, New Mexico JOHN C. CULVER, Iowa ROBERT MORGAN, North `Carolina GARY HART, Colorado M. BARRY MEYER, Chief Counsel and Wm'ief Clerk BAILEY GUARD, MInority Staff Director LEON G. BILLINGS AND RICHARD D. GRUNDY, Senior Protessional Staff 21enmhjers RICHARD A. HELLMAX, Minority Counsel JOHN W. YAGO, Jr., Assistant Chief Clerk; PHILIP T. CUMMINGS, Assistant Chief Counsel HAROLD I-I. BIIAYMAN, Senior Professional Staff Member (Minority) Professional and Research Staff: KARL R. BRAITHWAITE, EDWARD 0. CALLAN, JAMEs W. CASE (assistant counsel), PAUL CHIMES, TRENTON Criow, KATHERINE Y. CUDLIPP, PAUL, F. EBELTOFT, Jr., GEORGE F. FENTON, Jr., RANDOLPH G. FLOOD, KATHALEEN R. E. Formcusr, ANN GARRABRANT, RICHARD T. GP.EER, RICHARD M. HARRIS (assistant counsel), WGSLEY F. HAYDEN, RICHARD E. HEROD (assistant counsel, minority), VERONICA A. HOLLAND,. RICHARD E. KAIT, RONALD L. KATZ, JOHN D. KwAPISZ, LARRY D. MEYERS. JUDY F. PARENTE, JOHN B. PURINTOX, MARGARET E. SHANNON. CHARLENE A. STURaITIS, E.. STEVENS SWAIN, Jr., and SALLY W. WALKER (II) PAGENO="0003" CONTENTS OPENING STATEMENTS Page BakerS HOn. Howard H., Jr., U.S. Senator from the State of Tennessee~__ 3, 118 Bentsen, Hon. Lloyd, U.S. Senator from the State of Texas 64 Burdick, Hon. Quentin N., U.S. Senator from the State of North l)akot~_ 248 Domenici, Hon. Pete V., U.S. Senator from the State of New Mexico 434 Gravel, I-Ion. Mike, U.S. Senator from the State' of Alaska 433 Montoya, I-Ion. Joseph M., U.S. Senator from the ~State of New Mexico~_ 62, 342 Muskie, I-Ion. Edmund S., U.S. Senator from the State of Maine 115 Randolph, Hon. Jennings, U.S. Senator from the State of West Virginia_ 1, 61. 126. 247, 455 Stafford, lion. Robert T., U.S. Senator from the State of Vermont 65 LIST OF WITNESSES GENERAL SERVICES ADMINISTRATION (PAGE 1) Meisen, Waiter A., Acting Commissioner, Public Buildings Service, Gen- eral Services Administration ; accompanied by Loy M. Shipp, Jr., Assistant Commissioner, Office of Space Planning and Management; Robert DiLuciiio, Acting Executive Director. Public Buildings Service; Fred J. Wendehack. Deputy Assistant Commissioner, Office of Buildings Management; and Raymond A. Fontaine, Director of Budget, Office of Finance 5 FEDERAL HIGHWAY ADMINISTRATION (PAGE 61) Tieinnnn, I-Ion. Norbert T., Administrator, Federal I-iighway Adininistra- tion,. accompanied by Theodore C. Lutz, Deputy Under Secretary of Los Lamm. Executive Director: Joseph R. Coupal. Deputy Federal Highway Administrator and professional staff members, FWI-IA 63 ENVIRONMENTAL PROTECTION AGENCY (PAGE 115) Train, lion. Russell E.. Administrator. Environmental Protection Agency. accompanied by Al Aim. Assistant Administrator for Planning. James Agee, As~sistant Administrator for Water and Hazardous Materials, Roger Strelow. Assistant Administrator for Air and Waste Management. ~Vilson Talley. Assistant Administrator for Research and Development, Richard Johnson, Acting Assistant Administrator for Enforcement. Richard Redenius, Deputy Assistant Administrator for Resources Man-. agement, Robert ZenOr, General Counsel of EPA, and Jack Rhett. Deputy Assistant Administrator 119 FEDERAL DIsAsTER ASSISTANCE ADMINISTRATION ANT) ECONOMIC DEVELOPMENT ADMINISTRATION (PAGE 247) Duane Thomas P.. Administrator, Federal Disaster Assistance Adminis- tration, accompanied by William E. Crockett, Deputy Administrator, and Robert I-I. Vollanci, Chief, Financial Mamingemnent Staff 249 Prepared statement_ 266 -` (III) PAGENO="0004" Iv Mizell, Wilmer D., Sr., Assistant Secretary of Commerce for Economic Development, accompanied by Herbert S. Becker, Director, Office of Ad-. ministration and Program Analysis; Thomas W. Harvey, Acting Chief Counsel; Joseph G. Hamrick, Deputy Assistant Secretary for Economic Development Planning; Nathan L. Maryn, Special Assistant to Deputy Assistant Secretary for Economic Development; Brian B. Whalen, Page Chief, Budget Division 342 Prepared statement 364 CoRPS OF ENGINEERS (PAGE 433) Morris, Maj. Gen. J. W., Director of Civil Works, U.S. Army Corps of Engi- neers, accompanied by August Smet, Chief, Programs Division, and Irwin Reisler, Office of Policy 435 Prepared statement 460 ADDITIONAL MATERIAL GENERAL SERVICES ADMINISTRATION Alterations and major repairs 34 Comparison of estimated project cost with prospectus for original 63 proj- ect backlog 12 Comparison of SLUC rates for office space 19 Employment created in private sector 35 FBF system improvements 36 Federal buildings fund 29 Federal space requirements projection 27 GSA space inventory 15 Limitations on revenue 30 Purchase contract against direct construction - 32 Responses to questions from: Senator Morgan 50 Senator Buckley 51 Senator Stafford 52 Senator McClure 59 Washington Post, February 26, 1975, article from, entitled, "U.S. Reports $57 Billion in Overruns" 9 FEDERAL HIGHWAY ADMINISTRATION Alternatives to full highway needs 75 Estimated capital outlay by functional systems 77 Responses to additional staff questions 112 States with matching problems 78 Statements: Bayh, Hon. Birch, U.S. Senator from the State of Indiana 65 Carter, W. L., president, National Crushed Stone Association 104 Hanson, Daniel J., Jr., senior executive vice president, American Road Builders' Association 95 Koltnow, Peter G., Highway Users Federation 101 Stafseth, Henrick B., executive director, American Association of State Highway and Transportation officials 97 Status of completion of the Interstate System 111 Title X inventory study, summary and report on 82 ENVIRONMENTAL PROTECTION AGENCY Association of Local Air Pollution Control officials, letter from 245 "Manpower Implications of Alternative Levels of Sewer Works Construc- tion," report of the Bureau of Labor Statistics, excerpts from 143 "OCS 011 and Gas-An Environmental Assessment," report from the Coun- cil on Environmental Quality, excerpts from 163 Outer Continental Shelf thilling, comments from EPA relative to 154 Moellër, Dade W., associate director, Kresge Center for Environmental Health, statement of 202 PAGENO="0005" V Federal Disaster Assistance Administration and Economic Development Page Administration 247 Categorization of approved project applications 258 Distribution of FDAA staff expenses by organization element, fiscal years 1974-7G 254 "Requirements and Guidelines for State Disaster Preparedness Grants," a HUD handbook 279 Responses from EDA to questions from: Senator Randolph 360 Senator Montoya 362 Responses to questions submitted by Senator Burdick 271 Statements: Anderson, Raymond C., Federal Cocbairman, Upper Great Lakes Re- gional Commission 416 Fribley, Bill H., Federal Cochairman, Ozarks Regional Commission__ 411 Garbern, Daniel, Special Assistant to the Secretary of Commerce for Regional Economic Coordination 378 Hawke, R. Jac1~, Federal Cochairman, Coastal Plains Regional Com- Merriman, Russell F., Federal Cochairman, New England Regional Commission 407 Padrick, Jack C., Federal Cochairman, Northwest Regional Commis- sion 428 Whitehead, Donald W., Federal Cochairman, Appalachian Regional Commission 385 Womer, Stanley, Federal Cochairman, Four Corners Regional Com- mission 418 Wood, Warren C., Federal Cochairman, Old West Regional Commis- sion 424 Summary of title X proposals 350 Coxes or ENGINEERS Responses to questions from: Senator Gravel 446 Senator Domenici 448 PAGENO="0006" PAGENO="0007" BUDGET REVIEW * GENERAL SERVICES ADMINISTRATION WEDNESDAY, FEBRUARY 26, 1975 U.S. SENATE, COMMITTEE ON PUELIC WORKS, Washington, D.C. The committee met at 10 :10 a.m., pursuant to call, in room 4200, I)irksen Senate Office Building, I-Ion. Jennings Randolph (chairman of the full committee) presiding. Present: Senators Randolph, Culver, Morgan, Baker, and Stafford. OPENING STATEMENT OP HON JENNINGS RANDOLPH, U S SENATOR FROM THE STATE OP WEST VIRGINIA The CHAIRMAN. The members of the Public Works Committee are beginning a series of hearings that we anticipate will have a substan- tial and a significant effect on the operation of the Congress. During our work together, we will review the spending proposals by agencies whose activities are within the jurisdiction of the Public Works Committee. The ranking minority member of the committee, Mr. Baker, has evi- deiiced his intense interest in this subject matter as we begin this series of hearings by rearranging his schedule to be with us briefly today and to present a statement. Senator Morgan of North Carolina, one of the new members of our committee in the 94th Congress, will conduct the formal hearing today. These hearings are a new responsibility delegated to us by the Con- giessional Budget Act of 1974. That legislation is intended to provide the mechanism for an overall understanding of Federal expenditures. ~ the pioceclures established by that legislation we trust that we will be able as a Senate, in fact the Congress, to carry out our work in the context of the impact of what we do in this committee and other committees on the Federal budget. I think we need, perhaps more than we have had in the past, an overall look as the Members of Congress attempt to grasp the total spending sjtuation. it is essential at this particular time when there is a greater emphasis placed on the fiscal activities of the Federal Govern- ment. When we come together, as we do today, we look for an exchange of fact, expression of thought, and hopefully a better understanding, be- (1) PAGENO="0008" 2 cause if we are to examine the monetary impact of the actions of the Congress itself, the authorizing committees have a very real responsibility. Now the procedures of the Budget Act are new, and yet the members of this committee have had some experience in this area. Since the establishment of the Environmental Proteãtion Agency, there. have appeared before us those persons who come to annually discuss the spending proposals of that Agency. MTe have utilized the information to advise the Appropriations Committee as to our evaluation of the adequacy of Environmental Protection Agency budget proposals. So as we concern ourselves today with more than iust the spendmg by agencies and the requests that have been submitted to the Con- gress and the President's budget, we have a. responsibility to explore the factors that have gone into the preparation of the budget as it is coming to Capitol Hill. 1~Te shall want to know what differences there may be between, lets say, an original estimate by an agency, and what has gone into the budget message itself. In some agencies we will have to discuss the impact of the impound- ments, Senator Baker aiid Senator Morgan, on the activities of those agencies. We have., as members of this committee, been exceedingly active in connection with the impoundment subject. I have long felt that the Executive oversteps the President's po~ver to act in the impoundment of moneys that have been authorized by the Congress. I remember ver well that in 1967 I vigorously opposed impound- ment of Federal highway funds by the . administration of Lyndon Johnsoft That is a matter of record, which was of concern to the Public MTorks Committees in the House and in the Senate. We eiitered into an agreement with the I-louse committee members to hold a joint hearing or hearings on that subject. President Johnson, realizing the extent to which the Congress ex- pected to go in the matter of working for the release of the impounded highway funds, took the initiative at the beginning of our hearings and released the money. We might sa that lie was sensitive to what was about to happen here on the Hill. I remember him as being a person who could read the minds of the Congress rather well. In these cases, the impoundment cases, we will have in our minds the ability of Federal programs to meet the real public needs, and yet we realize there are certain fiscal restraints in which these programs must move forward. So we have a difficult task, but one that we approach with no mis- giving, because we shall work with you and others in these matters. WTe have, of course. the recession with its increasing problems affecting the economy. Certainly, Senator Baker and I are well aware of the job opportunities program passed late last year. It was in- tended to be a program that would provide jobs through quick-start, labor-intensive, federally assisted programs. So we must review with the agencies their abilities to generate employment through legislation such as that which I have just mentioned. PAGENO="0009" 3 IVe are in a sense moving into uncharted waters with this sort of a pi'o~~~~n, but I think it is important that we move. I~do understand that both the agencies and the authorizing com- mittees can profit from the experience and there will be a better under- st.a,ndino of the problems and how we meet them. So I sure that Senator Baker, Senator Morgan, and Senator Culver, and other members of the committee who will have the oppor- tunity to participate in these hearings, you will give us information that will be very important. We move in these matters hopefully m concert. There is no polariza- tion that should flow from such hearings. Differences, yes, can exist. But a vociferousness certainly would not be in the best interest of the members of the con'imittee. We have no desire for that. We have only a desire to be responsive to the Budget Act and to counsel with you in this instance about the problems which are your responsibility. Senator Baker? OPENING STATEMENT OP HON. HOWARD H. BAKER, 3R., U.S. SENATOR PROM THE STATE OP TENNESSEE Senator BAKER. Mr. Chairman, thank you very much. I welcome the opportunity to participate in these initial hearings of this committee in the. budget review process. I believe, as you believe, that the exercise will be not only instructive. and useful to this committee but hope-fully will be valuable to the General Services Administration as well. Our objective, of course, is not to duplicate the role of our colleagues on the Appropriations Committee but, rather, to seek to determine the general adequacy within GSA's authorized functions of the President's budet. proposals. . We have an opportunity in the GSA program to accelerate labor intensive areas of public works on existing buildings and repairs that can and must be designed to conserve energy. We have an opportunity, to obtain new offices, preserve neighborhood character, and renovation of older buildings. Mr. Chairman, I will be mOst pleased and honored to join with you and Senator Buckley and Senator Morgan in introducing legislation tomorrow to try to accomplish this goal. , Possibly' most significant, we confront a major decision on the fundamental concept of the Federal office space. GSA is accumulating massive debt against future funds through its Purchase Contract" Program. Rather than implementing the revolving fund apuroach pro- gram, the Federal Government is moving toward leasing instead of ownership in long-term office needs. And, as a matter of fact, it comes a.s a great surprise to me to observe that there has been a decline of. approximately 2 percent in the past 6 years of federally owned office space and an increase of oO percent in federally leased office space. These, of course, are important and significant recent developments that bear our intensive and careful attention; not only in the context of the budget review process, but in terms of coherent national policy in that respect. PAGENO="0010" 4 Both of those inq~iiries are jurisdictional to this committee, and I look forward to these hearings. The CHAIRMAN. Thank you very much, Senator Baker. I am going to ask, before 1 turn the Chair over to Senator Morgan,. whether you, Senator Culver, have a statement this morning. Senator CULVER. No. Thank you, Mr. Chairman. The CHAIRMAN. Thank you very much, Senator. Senator Stafford, as we begin these hearings, perhaps you would want to make an opening comment. Senator STAFFORD. Thank you very much, Mr. Chairman, but I think that the* comments that have been made by Mr. Baker and others I would concur with. I am ready to hear the witnesses. The CHAIRMAN. Thank you very much for coming today. We are going to have you, Mr. Meisen, as the leadoff witness, I pre- sume together with your colleagues, Mr. Shipp to your right. Mr. MEISEN. Yes, sir. The CHAIRMAN. And Mr. DiLuchio. Mr. MEISEN. Yes, sir. The CHAIRMAN. Mr. Wendehack. Mr. MEISEN. Yes, sir. The CHAIRMAN. And Mr. Fontaine. Mr. MEISEN. Yes. The CHAIRMAN. Fine. You look like a scholarly group. I will ask you, Senator Morgan, to shift gears, as it were, and move here to the chairing of our hearing. I wish to say that the new members of our committee are very active in accepting on their shoulders the robes of responsibility. We are very appreciative of this. To you, Senator Morgan, and Senator Culver and the other new Senators on our committee we are especially grateful. We know you have been doing some work on this subject. You have been doing some digging. You are, I think, worried about the overruns in certain Federal structures and the way we construct them and operate them. We want you gentlemen to be completely at ease and work with us. That is the way we want to work with you. Senator? Senator MORGAN [presiding]. Thank you very much. Mr. Chairman. I might say that the Chairman has very graciously provided the robes of responsibility. The only trouble I am haviug. Mr. Chairman, is getting mine to fit. I am afraid they are much too large for me. The CHAIRMAN. Just a moment, Senator. I imagine in North Caro- lina that you are under a fiscal umbrella you are able to look at and understand. Isn't that right? Senator MORGAN. Yes. The CHAIRMAN. Then you come to Washington and you are not sure where the spread stops. I think that is something that happens to a person who comes up from a State responsibility, with a knowledge of the problems of that State. In a sense you are not overwhelmed but you are wondering. And when you come, you help those of us who have been here longer. We sometimes become immune to these figures that you look upon as very real. So we welcome your leadership. PAGENO="0011" 5 Senator MORGAN. Thank you, sir. I would almost say that I was ov~rwhelmed when Mr. Meisen yesterday tried to help educate me in the ways of the Federal Government. Mr. Meisen, I won't start off by saying this, but I read the overruD story this morning. Mr. MEISEN. I did also, Senator. Senator MORGAN. As the chairman mentioned, coming from North Carolina where we usually appropriate the money before we buil d the building and let the contract and live with it, it is almost over- whelming. I hope that maybe I can explore some of the avenues before doing things to you. Mr. MEISEN. I would be happy to speak to that, Senator, when it is apprOpriate. Senator MORGAN. Let me say in the beginning, as indicated in my memorandum to the members of this committee, GSA budget require- ments for the public buildings program through fiscal year 176 are of great concern to all of us. A budget of more than $1 billion-to be exact, $1,149,983,000-is being requested. It seems to me an almost incomprehensible sum. As I learn of some of your commitments which must be fulfilled, not only from year to year but on a continuing basis, I am beginning to understand what a tremendous job you have. Because of this, I think it is incumbent upon the Congress to serb ously consider whatever proposals you feel obligated to submit to the Congress, and to give very careful consideration to those requests~ and to weigh their merits very carefully. Although that portion of your request pertaining solely to projects within our jurisdiction is only about $690 million, this nonetheless presents a staggering expenditure, deserving of our most attentive consideration. There are a few points I think we should clarify. But I wonder, Mr. Meisen, if you would like first to make an opening statement, generally outlining the proposals. Mr. MEIsEN. I would like to do that, Mr. Chairman. If it would be appropriate at this time, I have a very brief opening statement I would like thread. I believe copies have been furnished. Senator MORGAN. Without objection, if you would proceed to do that. STATEMENT OF WALTER A. MEISEN, ACTING COMMISSIONER, PUB- LIC BUILDINGS SERVICE, GENERAL SERVICES ADMINISTRATION; ACCOMPANIED BY LOY M. SHIPP, JR., ASSISTANT COMMISSIONER, OFFICE OP SPACE PLANNING AND MANAGEMENT; ROBERT DILUCHIO, ACTING EXECUTIVE DIRECTOR, PUBLIC BUILDINGS SERVICE; FRED J. WENDEHACK, DEPUTY ASSISTANT COMMIS- SIONER, OFFICE OF BUILDINGS MANAGEMENT; AND RAYMOND A. FONTAINE, DIRECTOR OF BUDGET, OFFICE OF FINANCE Mr. MEISEN. Thank you, Mr. Chairman. Mr. Chairman and members of time committee, on behalf of Admin- istrator Sampson, I am pleased to appear before this committee to dis- cuss the programs of the General Services Admniimistration, Public Buildings Service. PAGENO="0012" 6 In harmony with Public Law 92-313, GSA has recently changed its way of doing business with the establishment of the Federal buildings fund on July 1, 1974. Fiscal year 1976 will be our second year of operation under this new concept. During the first year, we have refined our rate survey and space measurement techniques and have macic other improvements in the fund's operation and will continue to do so. Under the Federal buildings fund, Federal agencies pay for the space and related services which they need to Perform their functions. The General Services. Administration is then responsible for the pro- vision of these space needs and related services and for the overall man- agement of the Government's real property operations. Our fiscal year 1976 budget now before you presents our program for providing the necessary space and related services to the Federal agencies. WTe have made every effort to simultaneously confront the continuing problem of inflation and the immediate problem of reces- sion and unemployment. I want to emphasize that our programs are a part of this aclmiuistra- tion's effort toward solving both of these serious economic pi'obiems. Our budget is consistent with the national efforts to solve these prob- louis within the long-term objectives that are important for the future well-being of the economy, and we strongly support the President's budget. We are also attacking' the problem of energy conservation in our various programs. During the last year we have achieved a 3O~percent- savings in the operation of our builclin~s. Energy design guidelines have been issued for constructiOn of new Federal buildings and for existing buildings. Projects in Manchester. N.H.. and Saginaw. Mich.. will utilize the latest energy-saving techniques and will serve to guide us in construc- tion of future buildings. The functions of the Public Buildings Service can he classified insix major activities as follows: 1. Construction. 2. Alteration and major repairs. 3. Purchase contract payments. 4. Rentalof space. 5. Real property operations (protection and cleaning of Federal buildings). 6. Program direction. Our construction program for fiscal year 1976. to be flnanced directly from Federal Buildings Fund revenues, consists of four iiew construc- tion proj ects and acquisitions of excess Government-owned property. The amount requested is a modest $29 million and reflects a program level comparable to the $25 million construction program for the current year. The four urojects proposed for new starts next veer are. a border station at Haines, Alaska: a Federal Office Building and a Motor Pool Facility at Mianii. Fla.: and, the restoration and conversion of the Customhouse at New Orleans, La. I would like to take a moment of your time here to discuss an important matter which seriously hinders our construction program. PAGENO="0013" 7 Until this current year, construction funds were appropriated to us on a no-year basis, so that once the Public Works Committees had authorized a project and the Appropriations Committees had funded it, we could proceed as quickly as possible to construct the building. I. might add at this point, Senator, that this was not the case, for exampl~, at the start of the FBI btiilding which was appropriated in pieces at various times throughout its history. We at the General Services Administration are quite proud of the work which we have done to promote efficient use of our construction and repair funds by employing such techniques as phased construc- tion, applications of buildings systems in design and construction, and the use of project and construction managers. All of these techniques require full-f uncling authority without fiscal year restriction, so that we may niove ahead with phases of each project as soon as possible. Our coiistruction budget for fiscal year 1976 requests full-project funding in order to complete projects as economically as is possible. As you know, it takes more than 1 year to coiistruct a building and, therefore, funds have been made available in the past on a no-year basis. This current fiscal year we received annual fuiids. Consequently, we must return to the Congress to request funds for projects which have already been authorized and funded. We propose to return to the no-year fundiiig concept so that once a project *is authorized and funded, we may proceed without further delay. Our fiscal year 1976 appropriation language has been revised to reflect this change. In the past few years we have constructed a large portion of our new Federal buildings under the purchase contract method of financing. This program provided for additional space requirements of the Fed- eral agencies, but has little or no impact on new current space require- ments now being met through the leasing of facilities. The purchase contract financing authority ends June 30, 1975. This budget contains $60 million for the payment of piiiicipai, interest, and ta.xes. Unless purchase contract is extended, our ability to provide new Federal buildings will then be limited to that. portion of the Federal buildings fund allocated to the construction activity: the $29 million I referred to earlier. Our alterations and major repair program maintains buildings at a propel level of operation by repairing the heating and air-condition- ing systems, repairing roofs and sidewalks, installing fire safety. and other protective systems and performing any other necessary repairs, including those relatmg to energy conservation. Our P1OPosed level of funding this year is $110 million. The rental of space activity provides $453 million for navment of rent for fiscal year 1976. This represent.s an increase of 61 million over the last year and contemplates implementation of our pro~~ain to achieve better utilization of space. The increase of $61 million is comuosecl of a net of $22 million for new space to he acquired in fiscal year 1976 $20 million to provide for the annualized cost of space acquired in fiscal year 1975; and SiS million for rental rate increases occurring in fiscal year 1976. PAGENO="0014" 8 It should be realized that emerging Federal programs must be ac- commodateci and it is impractical to maintain partially occupied Fed- eral buildings at the right place and the right time to house such programs. The short leadtime necessary to acquire leased space gives GSA the flexibility to meet these needs. Leased space will comprise about 36 *percent of our total inventory in fiscal year 1976, and we expect it to be only 39 percent by fiscal year 1980. At this time we are experiencing major expansion in a number of Federal programs. For example: Treasury projects an increased re- quiremelit for over 3 million square feet; HEW more than 1.7 million square feet; and Justice and Interior a little over 1 million square feet each. Additionally, the number of Federal employees that GSA is called upon to house continues to increase. The number of employees housed in GSA-controlled space has grown from 662,754 in fiscal year 1966 to an estimated 905,000 in fiscal year 1976. Budget years 1977 and beyond should reflect less of an increase, in terms of both dollars and square feet for the leasing program, as the full effects of our current space utilization efforts and construction programs are realized. The real propert3~ operations program to clean. heat. air-condition, maintain and protect our facilities is proposed at $397 million for fiscal year 1976. This activity finances all of the PBS employment engaged in these functions, including approximately 6,600 custodial workers, 4,200 maintenance mechanics, 3,000 guards, and 1,600 building services employees. Program direction, providing management direction, planning, and staff support for these areas, including staff for implementation of our space utilization programs, is proposed for $67 million in fiscal year 1976. These programs are funded from payments from Federal agencies for space and related services. These payments are approximately equivalent to commercial charges. Our income for fiscal year 1976 from these standard levels user charges is estimated to be $1,177 million. We are requesting authority to obligate $1,150 million in fiscal year 1976. This will be coupled with an estimated fund balance at the end of fiscal year 1975, so that total resources in the Federal buildings fund will be $1,285 million. In addition, $80 million will be retained in the fund during fiscal year 1976 for authorization by the Congress for PBS real property activities as required, and $55 million is slated to be returned to mis- cellaneous receipts of the Treasury and will be no longer available for Federal buildings fund programs. The Federal buildings fund has been in operation for approxi- mately 8 months. Both the concept of the Federal buildings fund and its operation, as a practical means of doing business, have proved highly successful. However~ the Federal buildings fund could be an even greater suc- cess if the following changes were made in fiscal year 1976: A no-year limitation on construction and repair and alteration funds as previously mentioned. PAGENO="0015" 9 * Allow GSA to use more of the income generated into the Federal buildings fund in any one year. Do not require deposits to the miscellaneous funds of the Treasury w here they are lost to the Federal buildings fund forever. AuthOrize use of revenues in the Federal buildings fund under sin- gle limitation to provide the necessary management flexibility to carry out programs under the original concept of the fund. These improvements will give us ~he operational flexibility to make the Federal buildings fund the success which was originally contem- plated by the Congress. I will be pleased to answer any questions which the committee may have. I have some charts as well, Mr. Chairman, that graphically illustrate some of these things that, I think, we can use as the questions appear to apply to these areas, if that is agreeable to you, sir. Senator MORGAN. Mr. Meisen, I would like to insert into the record the article appearing in today's Washington Post with regard to the overruns of GSA. I think the record should reflect, while I am placing this in the rec- ord, that I have beenin the public life long enough to know you don't accept newspaper articles as accurate, necessarily, or as reflecting the whole story. But, I think, b'eeatise it is or will be of some public interest and comment, that ~Ve should insert it into the record. * [The article referred to follows:] - [From the Washington Post, Feb. 26, 1975] U.S. REPORTS $57 BILLION IN OVERRUNS (By Duglas Watson) Cost overruns of $57 billion were reported on 269 recent federal construction proje~ts yesterday by the General Accounting Office. The overruns increased original estimates 75 percent, from $76 billion to $133 billion. GAO said tb~t ~osts of 59 of the non-military construction projects soared from at least two to nearly nine times the original estimates. Those. :59 projects accounted for $46 billion of the overrun total. GAO, Congress' auditing agency, said that engineering changes after projects were authorized-not inflation-were the most frequent reason given by federal agencies for the cost overruns. GAO said that inflation was probably a much more important factor than the $2 billion in increases federal agencies attributed to it. Comptroller General Eisner B. Staats, head of the GAO, said yesterday's report is the first the office has clone on cost overruns by the civilian agencies of the federal government. Staats said GAO henceforth will issue annual reports on such spending. GAO previously has issued four semiannual reports on cost overruns occurring in Defense Department purchases of major weapon systems. Earlier this month it said costs for 49 weapon systems incrCased by $17.1 billion during the past six months, largely because of inflationary factors. Those Defense Department cost overruns, which have drawn considerable criticism, may get comparatively less attention now that GAO has pointed out similarly large overruns by the federal government's civilian agencies. Local projects in GAO's report included the Metro rapid-transit system, originally estimated to cost $2 billion and now estimated to cost $4.5 billion, and the J. Edgar Hoover FBI Building, originally estimated at $60 million and now expected to cost $126 million. PAGENO="0016" 10 GAO reported these other cost overruns for local federal construction projects: Federal Law Enforcement Training Center at Beltsville, from an original $18 million estimate to $56.3 million. Howard University Teaching Hospital, from $23.4 million to $43 million. Extension of the Pirksen Senate Office Building, from $68.8 million to $85.1 million. No cost overruns were reported in construction of the $158.8 million James Madison annex of the Library of Congress and only a 6 percent overrun was repor1ed in construction of the $41.9 million National Air and Space Museum here. GAO looked at most non-military federal construction projects under way as of Dec. 31, 1973, involving more than $25 million in spending, but its study did not include some construction resulting from federal grants. In analyzing projects found to have cost overruns of 100 percent or more, GAO said of the ~46.4 billion in overruns, $19.1 billion resulted from engineering changes, $10.4 billion from changes in estimate calculations and $7.6 billion from increases in the size of projects. The Federal Highway Administration was the agency with by far the largest total of cost overruns, from 537.7 billion to $76.4 l)illion. Next was the Army Corps of Engineers, up fom $9.7 billion in original estimates to $19.4 billion. Senator MORGAN. I know you may not be in a position to do so, but I wonder if you would care to comment for the record. Mr. MEISEN. Yes; I would like to. I would like to furnish more com- plete details for you and to the committee in writing, if that is appropriate. Senator MORGAN. That would be all right. Mr. MEISEN. I would like to mention that I think the use of a title such as "Cost Overruns" is really inappropriate to the FBI building. All of the phases of construction for that project were bid as a lump sum competitive bid, and the actual overruns over the bids for each phase was very minimal. I would like to say that the $60 million original estimate that is qu~ed there is substantially correct and was made in 1962, and the completion is now just going to be done this year, and the figure they quoted for the completion is reasonably accurate as well and included all project costs, not just construction costs. I would like to say the funds for that project were appropriated and the actual construction was done, in widely separated years. and so the original $60 million would have been the figure had we bid and awarded that project in 1966. Just as you stated your experience in North Carolina, that's how it would have been built. As it was, we had to build a foundation in two phases first in subsequent years and the structure again in a later year. As a result, the inflation, if you look at what the inflation has been in the last 9 years, you will find it is almost 100 percent. I think the overrun alluded to is, in that order of magnitude, slightly less than double the original estimate. I would say that just briefly because I think it is important, but we would like to furnish some additional data and details to you. I am also pleased to note in the article we were not mentioned as one of the major agencies having cost overruns. That might he because our programs are not quite as large as some of the ones referenced. Senator MORGAN. I thank you for the comments. You may submit whatever statement you like. Mr. ~`1EISEN. Thank you. PAGENO="0017" 11 [The following information was subsequently supplied:] J. EDGAR Hoovun FBI BUILDING, WASHINGTON, D.C. A recent GAO report to the U.S. Congress reported an increase in the FBI building costs. Following is a status report for this project at critical stages, when major contracts were awarded, illustrating that at no time did the aggregate of the construction costs (contracts awarded by GSA) exceed the limit of authority for construction or the funds appropriated for construction. Obligated Limit of Funds appro- amounts for authority for priated for Item construction construction construction Phase I substructure and demolition contracts awarded (Novem- ber 1967) $11,109,571 $47,735,000 $11,320 000 Phase IA substructure contract and steam lines contracts awarded (August1970) 14, 930, 600 47, 735, 000 15, 120, 000 Phase II substructure contract award (June 1971) 84, 372, 500 84, 920, 000 84, 920, 000 Status: Contract amounts to date, including elevator and escalator contract and other contracts (February 1975) 107, 316, 000 107, 762, 000 107, 762, 008 lI0WARD UNIVERsITY TEACHING HOSPITAL, WASHiNGTON, D.C. (TRANSFER `ro GSA FROM DREW) A recent GAO report to the U.S. Congress showed an increase in the cost of the Howard University Teaching Hospital. Cost increases are attributed to an increase in gross area between the original concept and the final plans plus escalation of construction costs from June 1967 to August 1971. No obligations were incurred without transfer of funds from Howard Uni- versity. Financial management was the responsibility of Howard University and GSA's authorization to award any contracts was authorized by the transfer of funds from Howard. Item-January 1975 project summary report: Obligated amounts for project $41, 768, 518. 72 Limit of authority for project 43, 283, 875. 00 CONSOLIDATED LAW ENFORCEMENT TRAINING CENTER, BELTSVILLE, MD. (TRANSFER TO GSA FROM TREASURY DEPARTMENT) A recent GAO report to the Congress showed an increase in the costs for the Consolidated Law Enforcement Training Center. The present limit of cost as approved by the Public Works Committees of the House of Representatives and the Senate on May 14, 1971 and November 18, 1971 respectively is $52.6 million. Cost increases are attributed to a larger total project and escalation. In the administration of this project by GSA, funds were obligated only after transfer from the Treasury Department. Further, contracts and amendments thereto were not awarded without prior approval of Treasury. Item-January 1975 project summary report: Obligated amount for project $5, 674, 991. 38 Limit of authority for project 52, 664, 000. 00 Senator MORGAN. Senator Stafford, I was wondering if you have any questions on that particular article. You may not have seen it. Senator STAFFORD. Mr. Chairman, I do have some questions. Shall I go ahead with them now? Senator MORGAN. I suggest you do. On this question, we can do it now. Senator STAFFORD. I wonder if the witness could, in the light of the newspaper report of very large cost overruns~ including some GSA buildings, provide us for the record at least with figures on the final construction of those buildings among the 63 that were in the 172 5O-194-7~----2 PAGENO="0018" 12 backlog and compare that final estimated cost with that estimated in the prospectus. Could that be done? Mr. MEISEN. Yes. We could get you that, sir. [The information requested follows:] PURCHASE CONTRACT-COMPARISON OFESTIMATED PROJECT COST WITH PROSPECTUS FOR ORIGINAL 63 PROJECT BACKLOG S Maximum allowable Estimated TPC on Date of prospectus limitation approved Project prospectus submission to Congress under Public Law 92-313 Estimatad TPC Arizona: Tucson, F03 $4, 434, 000 Aug. 30, 1966 $7, 939, 629 $3, 579, 540 Arkansas: Batesville, P0 CT FOB 1, 841, 000 Aug. 1, 1966 3,376, 707 2, 873, 733 California: Los Angeles, PF 1 San Diego, FB 44, 258, 000 Oct. 13, 1970 53, 552, 180 39, 890, 560 Santa Ana, FB 10, 3t4, 000 Mar. 27,1968 15, 832, 679 11, 940, 784 Santa Rosa, FB 5, 691, 000 Oct. 13, 1970 8, 010, 049 5, 290, 965 Van Nuys, FOB 10, 090, 700 Apr. 17, 1972 10, 124, 995 8,414, 913 Connecticut: New Haven, FB PD 6, 810, 000 Nov. 6, 1967 14, 232, 671 13, 705, 000 Dsleware: Dover, FOB 1,215, 000 June 28, 1935 2, 428, 439 1,891, 263 Florida; Orlando, CT FB 10, 576, tOO Nov. 13, 1969 15, 745, 205 10, 394, 491 Georgia: Athens, FOB 4, 602, 000 Apr. 17, 1972 4, 974, 387 2, 929, 999 Atlanta, R. B. Russell FB 27, 353, 000 Aug. 30, 1966 62, 490, 997 77, 066, 000 Griffin, P0 FB~ Rome, PD CT 3,320, 000 Aug. 1, 1966 5, 955, 762 3, 904, 519 Waycross, PD FB° Hawaii: Honolulu, Prince J. K. Kalanianasle FB 47, 541, 600 Apr. 17, 1972 50, 313, 275 33, 934, 250 Idaho: Moscow, P0 CT 1, 739, 000 Feb. 5, 1964 3, 944, 003 3, 073, 533 Sandpoint, FOB 1, 508, 000 Feb. 27, 1968 2, 407, 814 2, 407, 800 Illinois: Chicago, FARC 3,508,000 Aug. 1,1966 6,309,472 5,118,685 Mount Vernon, FOB 1,599,000 Nov. 20, 1973 41,599,000 1,478,877 Indiana: Indianapolis, FOB 13,638,000 Feb. 5,1964 31,181,923 18,062,700 Iowa: Iowa City, PD FOB 4,714,000 Feb. 27,1968 7,373,161 4,986,544 Louisiana: I4ow Orleans, Hale Boggs FB 24,877,000 rio 38,546,912 32,382,500 Maine: Waterville, PD FB3 Maryland: Baltimore, E. A. Garmatz FB 19,494,250 Apr. 4,1969 29,450,128 27,416,824 Massachusetts: Fitchburg, Pliilbin FOB 6,778,300 June 8,1972 47,006,825 5,018,777 New Bedford, Keith FB 2,408,000 June 2,1972 42,648,800 2,648,800 Michigan: Ann Arbor, FOB 3,766,000 Feb. 27,1968 7,367,673 7,367,673 Detroit, P. V. McNamara FOB 33,021,000 Jan. 31,1963 83,044,513 59,842,360 Saginaw, FOB 6,244,000 Feb. 28, 1974 46,868,400 6,868,400 Mississippi: Hattiesburg, W. M. Colmer FB 2,841,000 Feb. 27, 1968 4,472,668 3,911,743 Nebraska: Lincoln, CT FOB PF 14,890,000 Jan. 28,1965 30,707,647 19,745,438 New Hampshire: Manchester, FOB 11,090,000 Oct. 24,1974 11,090,000 11,025,200 New Mexico: Las Cruces, CT FOB 3,815,000 June 30, 1971 4,336,866 3,148,154 New York: Albany, LW. O'Brien FB 8, 524, 000 Feb. 5, 1964 19, 402, 891 12, 942, 466 Auburn, PD CT FB 0 Hempstead, FB e New York, CU CT FOB Annex 37, 910, 000 June 30, 1965 76, 957, 300 61, 679, 400 Syracuse, CT FOB 13, 690, 000 Aug. 30, 1966 24, 859, 671 20, 150, 110 North Carolina: Winston-Salem, CT FOB 13, 792, 000 June 8,1972 4 15, 171, 200 15, 171, 200 Ohio: Akron, CT FOB PF 16, 957, 000 Nov. 23, 1970 20, 517, 970 17, 064, 000 Dayton, CT FOB 9, 797, 000 Feb. 22, 1974 9, 797, 000 9, 797, 000 Oregon: Eugene, CT FB 5, 530, 000 Feb. 27, 1968 9, 223, 246 7, 828, 780 Portland, FB 15, 513, 000 Jan. 31, 1963 39, 620, 202 23, 151, 973 Pennsylvania: Williamsport, CT FOB 5,003,000 June 8, 1972 4 5,503,300 5,405,601 Puerto Rico: San Juan, CT FOB 12, 445, 000 June 30, 1965 25, 263, 350 21, 891, 000 Rhode Island: Woonsocket, PD FB 3 South Carolina: Florence, J. L. McMillars PB 4, 603, 000 Aug. 1, 1966 9, 372, 228 4,859,684 South Dakota: Aberdeen, FOB 6, 387, 000 Feb. 27, 1968 9, 891, 176 7,755,055 Huron, FOB 6, 819, 000 June 4, 1974 4 7, 500, 900 6, 651, 800 Rapid City, CT FOB 3,217,000 Nov. 6, 1967 5, 116, 481 4,670,373 Tennessee: Nashville, CT FOB Annex 8,735, 000 Mar. 2, 1965 18, 042, 746 13, 778, 258 PAGENO="0019" 13 PURCHASE CONTRACT-COMPARISON OF ESTIMATED PROJECT COST WITH PROSPECTUS FOR ORIGINAL 63 PROJECT BACKLOG-Continusd Maximum allowable - Estimated TPC on . Date of prospectus limitation under Public Estimated Project approved prospectus submission to Congress Law 92-313 TPC Texas: Denton, PD FB ~ Fort Worth, Pkg. Fac 3,081,000 Oct. 3,1966 5,428,349 3,746,301 Houston, VMF ~ Pearsall, P0 FOB 271,000 Feb. 5,1964 615,101 532,679 San Angelo, P0 CT FB Vermont: Essex Junction, W. Prouty FB 460,000 Mar. 2,1965 946,195 726,309 Virginia: Roanoke, B. H. Poff FB 15,610,000 Feb. 22, 1974 415,610,000 15,498,027 Virgin lslaeds: Charlotte Amalie, CT FOB 5,931,000 June 2,1972 46,524,100 87,823,700 Washington: Wenatchee, PD FB 4,308,000 Aug. 1,1966 7,716,069 4,531,413 Wisconsin: LaCrosse, P0 CT3 Madison, FB ~ Design deferral request granted; use of site for surface parting is Lou of profcsed structure. Cost estimates being revised. 2Revised prospectus to be transmitted. Withdrawn August 1972-transferred to Postal Service. 4 Escalated in accordance with 40 U.S.C. 606(b). All others escalated in accordance with 40 U.S.C. 602a(e). ~ Proposed for cancellation. 6 Design deferred pending resolution of housing plan. 7 Canceled-lack of space requirements. 8 Revised prospectus pending. Revised prospectus being restudied. Senator STAFFORD. In the general area of questions which I am interested in, for the last several years this Senator has watched the construction of the building just as we leave the Southwest Freeway and approach the Rayburn Building. I think it is one designed for HEW. Mr. MEISEN. That is correct, sir. Senator STAFFORD. Frankly, my curiosity and my friends' has been aroused by the apparent strei1gth of the building. It appeared to us to have a skeleton sufficient to make it an armored spot of some kind. Maybe the Secretary needs an armored spot in these times. I wonder why this building has been built so unusually strong. Mr. MEISEN. I think it gives the appearance of being unusually strong. The main reason, as you know, the freeway goes under that building as does a 13-foot interceptor sewer. As a result, that building basically only has four main piers that go down to the foundations. These piers hold up the trusses at the very top of the building. The rest of the building is hung from those roof trusses. The reason was to avoid too many little individual footings coming down on top of the footing and interceptor sewer that happens to be in there. I am sure it does give that appearance. It is a very economical building, I might acid. Senator STAFFORD. Is that one of those subject to a cost overrun Mr. METSEN. Senator, I have an awful lot of difficulty with that term. What we would call a cost overrun is if we lump sum bid a buildinėg for $100 million and through chanėge orders negotiated with a construction contractor, the total price goes up to $110 million, we would say we had $10 million worth of overruns. PAGENO="0020" 14 If, however, we come to Congress and estimate a project at $l0~ million and before we can get appropriations, the cost rises to $110 million, and then we solicit bids and get bids of 8110 million, we would not consider that an overrun although it would be an increase over an original estimate. That is what is being referred to as an increase over original esti- mate rather than increase over bid prices. I think you will find as an average that on GSA projects we have increases over bid prices of approximately 5 percent, overall, on all of our projects. About 3 percent of these involve changes in agency requirements where, say, a conWuter is now needed where it originally wasn't planned. About 2 percent is in the area of unforeseen conditions ov design changes. Those are rough figures. I would be glad to furnish more detailed figures if you would like. Senator STAFFORD. All right. [Additional information, subsequently supplied, follows:] GSA uses a ~ percent contingency allowance for new construction ~wojeets to fund change orders which typically occur after the award of the basic con- struction contract. These changes can be classified into: (1) agency or teaant changes; and (2) unforeseen conditions or design modifications. Following is a tabulation of a survey of 39 projects in ten GSA regions in which $28.9 million was spent on $391.0 million worth of construction contractu or 7.41 percent: Type of change Percent of total contracts Factor to reduce to 5 percent' A5ju~ted change order percentages. Agency or tenant change Unforeseen conditiens or design modifications Total 4. 64 2. 77 0. 674 . 674 2 3* 13 3 1. 87 7.41 .674 5.d I GSA currently uses 5 percent because turnaround time between design completion and start of construction is s~urter. 2 Soy 3 percent. 3 Say 2 percent. Senator STAFFORD. In your prepared statement you refer to the per- centage of GSA inventory that is leased. Does the percentage include the space under the purchase contract program? What are the square footage figures over 1980 ? What is the est~matccl annual cost of that lease plus the purchase contracts base in 1980, if you have those figures. Mr. MEISEN. The answer to the first part of your question is the pur- chase contract buildings arc not included in lease space. They are. for all practical purposes, Government-owned buildings. The chart is a pie showing the amount of space we have in inventory:: some 298 million square feet of space. It indicates that we own approximately 210 million square feet of which about 10 iTlilliOn is in the purchase contract program. and we lease about 88 milljon square feet of space, which is approximately 30 percent of our total space inventory. [The chart referred to follows:] PAGENO="0021" 15 = 2~5: ~J~LL~c;f~ sc... Fi~ Mr. MEISEN. But for all purposes, the purchase contracts are Govern- ment-owned buildings. We build them as Government projects. We operate them as Federal buildings and we own them at the end of 30: years, as any other Federal building. The only difference between that and a direct financed construction project is that we borrow the money to build them from the Federal Finarteing'Bank and we pay it'back over 30 years, and during that 30 years we pay taxes to the local community in which the building is hou~ed. :. Senator STAFFORD. Could you tell us what departmental programs will require the major increases in space you have outlined in your statement? Mr. MEISEN. Are you asking which programs of Treasury and I-JEW, et cetera? Senator STAFFORD. Yes. Mr. MEISEN. Mr. Shipp, assistant commissioner of the office of space ]~iannmg and management, has those figures. Mr. Siurp. There are significant expansions taking in the Social Se- curity area. For example, just to give you some idea of the trend, between 1965 and 1975 there was a total increase of Social Security em- ployment in the neighborhood of 40,000 people that we had to house. I know from talking with I-JEW and SSA representatives that they nrc now discussing with the Office of Management and Budget the pos- CONTRACT PAGENO="0022" 16 sibility of getting a special exception from that office to employ as many as 15,000 additional employees during fiscal year 1975 and fiscal year 1976. The Treasury Department is experiencing some expansionS too, in their efforts to expand the audit program, to expand the tax collection program. We have other instances where the Department of Defense, for ex- ample, because of their inability to get through their committee a mili- tary construction program for the construction of a building to house or to replace older buildings on a fort, will ask us to lease a major facility for them. We have examples of this up in New .Jersey where we leased almost 600,000 square feet just outside of Fort Monmouth to house people who were housed in substandard houses that were World War II barracks that are scattered over a wide area, making the operation iiiefficient. It is this type of thing creating these additional demands. In fact, over a period of time, historically we project about a 23.5-percent increase annually in our total space requirements because of the con- tinuing expansion of Federal programs. This doesn't take into consideration my previous statement with regard to specific agencies, added to the fact we have the creation of new agencies such as EPA, for example. We had to go out and lease space for various agencies' headquarters of over a quarter of a million square feet of space. This,. plus regional offices throughout the country. Recently the FEA was established. That immediately created a de- mand for 300,000 square feet of space in which to consolidate activities of that particular agency. So the expanding social programs, the expanding energy programs,. environmental programs, tax programs, and so forth, all create de- mands for additional space. We respond to those requirements. Senator STAFFORD. Thank you, Mr. Chairman. I don't know what your plans are here. I have other questions, but I can pass the time back and forth every 5 minutes, or I can submit mine for the record; what- ever the Chair desires. Senator MORGAN. It doesn't really matter. We will now proceed with. a few of the staff questions. Mr. Meisen, before I begin, let me do as I did yesterday and ask you. to educate me on some of the terms that you have used. You speak of appropriations being made on the no-year basis. Would you explain what that means? Mr. MEI5EN. Yes, sir, prior to fiscal year 1975, appropriations for construction were appropriations that once appropriated for a project were available without fiscal year limitation, we could obligate by let- ting a contract, even though the contract went over a number of years or even though all the costs associated with that ~roject weren't obli- gated the same fiscal year as the year of appropriation. The total lump suni for the design and construction of a building would be appropriated at one point in time. That appropriation would be available until that building was completed. PAGENO="0023" 17 Under the Federal building fund programs, a similar arrangement was anticipated. However, there were annual fiscal year hmitations placed on the funds authorized by the Congress. After 1 fiscal year those funds would have to be requested again for whatever was needed, to complete the balance Of the building. So at the current time, we have to come back to the Congress at the end of this fiscal year to rerequest money for that portion of contracts or that portion of supervision work that has not been completed on any ongoing construction project. * Senator MORGAN. If I understand you correctly, then, when you say appropriations have been made on a no-year basis, you have the authority and the money available; then you draw your plans, let your contracts, and get a firm co1npetitive bid. Mr. MEISEN. Yes, sir. Senator MORGAN. If they are not appropriated on a no-year basis, yOU can only go so far as you have, funds appropriated. Mr. MEIsEN. As you can imagine, whenever we award a construction contract, we reserve a percentage, for example, for contingencies. This would be 5 percent, I would say on an average project for unforeseen conditions and so on. As it stands now, at the end of each fiscal year we have to return any of those contingencies that we don't use and have to reask for them the next day to go on with the project again. We feel if the Congress authorizes a project in total dollar limita- tions, we will stay within that dollar limitation. Having no-year funds helps us speed up our whole construction program. We have the funds' available for the duration of the entire project rather than having to go back for the remaining balance each fiscal year. Senator MORGAN. Let me go back further, if you will bear with me. On the FBI building, you were allocated, or there was appropriated. by the Congress, only enough funds to let the contract for the base~ ment and first floor. Mr. MEISEN. Yes, sir. That project was done in three construction phases over a number of years. The Appropriations Committee appro- priated just sufficient funds to do the first two lower levels of the base- ment. A year or 2 years later they gave us the money, as that phase was completing, to award the contract for the next two levels and bring it up to ground level; and then in subsequent years gave us sufficient money to complete the project. As a result, we couldn't award a one-lump-sum construction con- tract for the whole building initially. Senator MORGAN. Are we constructing any buildings under that process now? Mr. METSEN. Yes, but we are doing it on a planned basis as opposed to a forced basis because of incremental funding. In fact, we find it very practical to phase construction, not over long periods of years, but as required to keep the project moving to completion as quickly as we can. For example, instead of waiting for a design to be totally completed on a ~roject now, as soon as the foundation is designed, we will start PAGENO="0024" 18. construction of that foundation. While that is being constructed, we will complete the design of the rest of the building and award the con- tract for the rest of the building. We save about 8 months on an average job by doing it this way. The process I referred to on the FBI building is strictly an appropria- tions problem rather than construction scheduling, and projects are stretched out over many, many years because of incremental funding. Senator MORGAN. There are a number of other questions but, because of time, let me ask two more general questions and then we will move on. First of all, you mentioned that rent charged the various FederaT agencies for the use of buildings is generally equivalent to that charged by commercial owners. Mr. MEISEN. It is generally equivalent commercial rental, yes, sir. Senator MORGAN. Taking into consideration the fact that the Fed- oral Government does not normally pay property taxes and many other liabilities, why is it as expensive as commercial? Mr. MEIsEN. Let me have Mr. DiLuchio speak on this. Mr. DiL~cmo. Public Law 92-313 authorizes the Federal buildings fund procedure, and it requires that our rates charged to occupants should approximate commercial charges. The statement that you make is true. There are some costs that pri- vate entrepreneurs do have that Government doesn't have. There are some costs we incur that they do not incur, either. Senator MORGAN. Such as? Mr. DiLucrno. Such as the type of buildings that we build some of which are monumental-type structures; the preservation of historical buildings that we have to operate and maintain is costly. These are costs they don't have but which we have. The commercial equivalency is determined annually by conducting market surveys to find out what the commercial rate is in various areas throughout the country. We have a chart here that depicts some of those rates in the major areas where we have space around the country. As you can see from the list, the colunm on the lefthand side represents the fiscal year 1975 aver- age rate for office space that we may charge in those areas for a typical facility where agencies are located. The second column shows those sanie rates to be used for fiscal year 1976. You can see the pluses and minuses arrayed on the chart. The second chart shows the overall average of the rates between 1975 and 1976. Where our average rate in fiscal. year 1975 for office space throughout the country was $7.35 a square fooh by conducting our market survey recently, we determined that it should be 31 cents a square foot less for fiscal year 1976. These rates are derived from sampling space that is available on the commercial market for lease by anyone. PAGENO="0025" 19 [The charts referred to follow:] COMPARISON OF SLUC RATES FOR OFFICE SPACE BY MFSA [Dollars per square footi Senator MORGAN. Is it not true that perhaps one of the reasons for additional cost is that it is just simply more expensive for the Federal Government to maintain the buildings because of salaries, fringe bene- fits, retirement benefits, and so forth? * Mr. MEI5EN.. No, Senator, I don't think that is true; although I think the average cleaning worker employed by the Government is probably paid slightly more. I think the productivity of our employees who operate buildings offsets the slightly higher wage rate. More important I think is the cost of building our buildings versus the commercial buildings in many respects. It has been published by the American Contractors Association that the Davis-Bacon Act adds about 15 percent on the average construc- tion facility. Senator MORGAN. What was that? Mr. MEISEN. The Davis-Bacon Act, which is the Fair Labor Pro- visions Act. I am not speaking against the fair labor provision. I think it is an important goal of the program. It does add about 15 percent to our construction cost that a private entrepreneur doesn't pay. Many other programs of the Federal Government similarly add costs to our building costs. You can see construction is not a major pro- gram in fiscal year 1976; it is about $63 million a year, and repairs and alterations are about $100 million. So it is about $200 million of the $1 billion is what we are spending on construction. Senator MORGAN. You partially answered my next question. It is on nn issue that, with the permission of the committee chairman during the next few months I would like for us to explore. That is-and you will have to pardon my continued reference to North Carolina but that is the only area in which I have had experience. At the present time we Major Federal Fiscal Fiscal spacearea yearl975 yearl976 Change Major Federal Fiscal Fiscal space area year 1975 year 1976 Change Boston 10. 03 7. 65 -2. 38 Buffalo 6. 69 5. 34 -1. 35 Nassau-Suffolk 7. 93 6. 63 -1. 30 Newark 7. 93 8. 22 +. 29 New York 9. 80 9. 72 -. 08 Baltimore 7. 80 6. 03 -1. 77 Philadelphia 9. 18 10. 71 +1. 53 Pittsburgh 7. 86 8. 45 +. 59 Washington D.C 6. 51 7. 21 +. 70 Atlanta 5. 21 6. 95 +1. 74 Birmingham 4. 93 5. 30 +. 37 Louisville 6. 19 7. 42 +1. 23 Memphis 6.26 4.82 -1.44 Miami... 6.63 7.12 +.49 Chicago 9. 08 7. 68 -1.40 Cincinnati 7. 19 6. 99 -. 20 Cleveland 8. 19 8. 35 +. 16 Detroit 7.82 7. 68 -. 14 Milwaukee 8. 00 5. 31 -2. 69 Minneapolis 7. 68 6. 73 * -. 95 Kansas City 5. 18 5. 73 +. 55 Omaha 4.86 5.48 +.62 St. Louis Topeka Albuquerque Austin Dallas Houston New Orleans Colorado Springs Denver Salt Lake City Honolulu Los Angeles Phoenix Sacramento San Diego San Francisco Anchorage Portland Seattle 5.43 4.82 -.61 4.52 5.48 +.96 6.09 6.56 +47 6.02 7.19 +1.17 6.96 6.02 -.94 6.45 7.31 ą86 7.13 5.93 -1.20 6. 38 5. 17 -1. 21 7.49 6.85 -.64 5.14 5.17 +03 8.46 9.04 +66 8. 60 6. 58 -2. 02 7.20 7.46 ą.26 7.67 6.53 -1.14 8.97 7.47 -1.50 9.09 10.07 +98 13.09 12.29 -.80 8.03 5.51 -2.52 7.49 7.65 +.16 Average 7. 35 7. 04 PAGENO="0026" 20 are building a high-rise office building on Heritage Square in the capital city. It was let by contract, as I mentioned, with funds available. Its cost per square foot is $45. I believe you told me that the average cost per square foot or projected cost for the Baltimore-project would be about $100. Mr. MEIsEN. Our construction costs have been running in the $40 to $50 a square foot range for that building. I have the same difficulty that you often have in this regard, that it is very difficult. to get com- parisons -between the. public sector and the commercial .sector,. and, in fact. even between the different Government levels, because it ~ never clear whether they are including design costs or only construction costs. . . -. One of the things we have to work on jointly in. discussing projects is developing a common language sO when I say we pay $40 a square foot and you say you are paying $40, we know we are talking about the same thing. Senator MORGAN. In the next few months I would like for us to explore this, to see if it is a. myth that the ])ublic is talking about. It seems to be generally conceded that Federal buildings cost more, and we ought t.o find out why. If it is true, then we ought to look and see what we caii do to bring them closer together. . . - Mr. MEISEN. ~\Te certainly support ~OU in that, sir. - . Senator MORGAN. Mr. Meisen. in your prepared statement you men- tioned four projects had been selected or proposed for fiscal year 1976. Could you tell the committee how these four projects were selected, and which will be financed directly from building fund. revenues in fiscal year 1976? Mr. MEISEN. All of these projects will be funded from Federal build- ing ~unci revenues. These are not purchase contract projects. I would like to have Mr. Shipp outline for you generally the.proce- clure we follow in selecting projects such as this. Mr. Si-iipp. We start off with a series of surveys out in the regions called the Federal spa.ce situation reports. WTe proceed from that point to further development and we identify the potential need for a new Federal building in the community... We proceed further with what we call a- project development report which goes into greater detail in terms of local -planning objectives. the space situation in the particular community, and the condition of the space that employees are in in the comnmnit-y at that time. taking into consideration a whole myriad of factors that impact a decision as to whether we will include that project in a particular construction program. Based on the data developed in this way, we identify projects that would be included in construction programs for the next 5 years. To establish an order of priority, utilizing a model that applies or takes into consideration certain factors, we identify those projects that have the greatest- priority or urgency of neecL clue consideration being given to equitable distribution of those projects throughout the country. PAGENO="0027" 21 These. four projec.ts that were identified were ones that liave rela- tively high prioiity. For example, in Miami there is a very urgent need to expand the court facilities at that particular location. That weighs very heavily with us in terms of identifying projects with high pri- orities, the need to provide additional court facilities. With respect to border stations and these .types of things, we do not apply priority to those in terms of the larger system that I outlined. We do that by consulting with the people in the Bureau of Customs and Immigration and Naturalization Service. We have a separate list of priority projects that really is their piiority list. Then we try to mesh the two within the amount of money that we have available for construction. Senator MORGAN. Who actually does the meshing toget.her of~ th~ projects, to make a. final decision? Is it a committee or the Commissioner? . Mr. Smrr. It is done in my office. I submit those recommendations to Mr. Meisen who then concurs or rejects or makes additions or changes. .. Senator MORGAN. You mentioned the Mia.mi project. When do you expect to submit the prospectus on t.he Miami project, as well as the one in Alaska? Mr. Smrr. We anticipate that we will be able to submit the.prospec- tus on the Miami project within the next 60 days. With respect to the Ilaines, Alaska, project, the prospectus which has to be first sub- mitted tothe Office of Management and Budget is in the process now, audi would anticipate within the next 30 days after being submitted to that office for review and concurrence we can submit it to the Public Works Committee. Senator MORGAN. Do, you have any idea how long it would be after you submit it to the Office of Management and Budget, .before you will be able to submit it to the con~rnittee? Mr. Srnrr. Our experience there varies from a matter of days to a matter of years. Senator MORGAN. You are not a prophet. Mr. Srnrr. W~ hope they will move very promptly. Mr. MEISEN. They have indicated, Senator, that these are necessary and viable projects, so I wouldn't anticipate a major delay in the processing. Senator MORGAN. Mr. Meisen, one of the four projects you submitted, the New Orleans Customhouse, was authorized in 1972. I am somewha.t at a loss as to why work has not been done on it. Why does it now have priority if it hasn't had any since 1972? Mr. MEI5EN. Actually, this is a restoration project. Senator MORGAN. Is that the old customhouse? Mr. MEIsEN. Yes, sir. Part of the design and planning has been to assess considerable damage or deterioration to some of the older parts of this historic building. We are requesting funds at this time. Senator MORGAN. A little while ago when we were talking about no- year appropriation and the no-year basis, you mentioned that GSA could proceed with construction of a building without delay if appro- priations.ere made by the Congress on a no-year basis. Mr. MEI5EN. Yes, sir. PAGENO="0028" 22 Senator MORGAN. Did you always do that, even when Congress was making appropriations on a no-year basis? Mr. MEISEN. Do you mean, did we phase construction? Senator MORGAN. What I am really saying is, was it only the Con- gress that held you up on that? Mr. MEISEN. On the FBI building? Senator MORGAN. Yes. Mr. MEISEN. My recollection, and it goes back a few years, is the plans were totally complete in about 1b70. Completion of the FBI structure itself subsequent to that, because of the passage of time, did require some design changes. But basically I think the plans were completed in 1970, so we could have gone ahead with the whole building. Senator MORGAN. You cite that GSA promoted efficient use of con- struction and repair funds by the application of the building-system technique, among other things, but you state it requires full funding authority without fiscal year restriction. Mr. MEIsEN. Yes, sir. Senator MORGAN. Is it not true that GSA's only effort in this respect has been through a purchase contract arrangement using private funds? Mr. MEISEN. No, sir, that is not correct. We have a number of pro]- ects that have been highly successful. Infact, one that was mentioned in the newspaper this morning, the Air and Space Museum, was a con- struction management-project management effort. It will be completed about 3 months ahead of schedule and within 3 percent-it mentions the number-of its cost. It is a directly appropriated project. There are a number of others as well, such as the Columbus, Ohio, Federal Office Building; the Oklahoma City Federal Office Building; and the Winston-Salem, N.C., Courthouse and Federal Office Building. Senator MORGAN. Is GSA's level of planning sufficient to accom- modate the expanded building program if increased appropriations are approved by this Congress? Mr. MEISEN. We think we have the technical ability to move out. Senator MORGAN. You do have.? Mr. MEISEN. Yes, sir. Senator MORGAN. At this point, I did have another question. Senator STAFFORD. Mr. Chairman, while you are checkingthe papers, I will go ahead with one or two questions. Then I will have to leave. Senator MORGAN. I was going to suggest that. Senator STAFFORD. Mr. Meisen, what renovation ~work is contein- plated in the budget which we see before us this morning and how much renovation could be accomplished by GSA without budget constraints? Mr. MEISEN. We have a backlog of almost $965 million worth of re- pairs and alterations work. This program proposes approximately $110 million worth of repairs and alterations. Naturally that repair and alteration work is necessary to maintain our buildings. Senator STAFFORD. I guess we are talking about semantics when we call it repairs and alterations and renovation. PAGENO="0029" 23 Mr. MmSEN. Yes, sir. Senator STAFFORD. It all adds up to the same item. Mr. MEI5EN. That is correct. Senator STAFFORD. May I ask, then, how many~ jobs can be provided for $1 million investment in renovation work or repairs and alterations work and how does that compare with the number of jobs that might be available in a new Federal constructions spending program of the same amount, that is, $1 million? Mr. MEI5EN. A million dollars? Senator STAFFORD. A million dollars. Mr. MEISEN. I would estimate that a million dollars provides very few. Let's analyze it for $100 million. We estimate that new construction of $100 million, that is an aver- age, large-size new construction projects, creates about 5,000 jobs. If you were to do the same $100 million in renovation work, you would probably create about 25,000 jobs, about five times as many. Senator STAFFORD. That is an interesting figure to have. Could you comment, Mr. Meisen, on what is the average amount of office space available to a typical Federal employee and how that coin- pares with the average for an employee in the private sector of industry? Mr. MEI5EN. Mr. Shipp will comment on that. Mr. SHIPP. In terms of office space, the space utilization for a typical employee will be in the range of 130 to 150 square feet, depending on the function of the employee, what kind of work he is doing. This means in many agencies you will get the type of activity that is largely clerical or very repetitive assembly type of work where it can drop below that range. There may be other areas where as in the private sector it is scientific work and the amount of space may rise above that. Generally it is in the range of 130 to 150 square feet per person. This compares very favorably, as best we have been able to ascertain, with the private sector, trying to match up comparable types of activities. The CHAIRMAN. Could I interrupt? Senator STAFFORD. Yes. The CHAIRMAN. Senator Stafford and I work together in the sub- committee on the Handicapped of the Labor and Public Welfare Committee. We have been working on construction and alteration of our Fed- eral buildings to accommodate the physically handicapped, including, Mr. Chairman, paraplegics and others who use the wheelchairs. \~Te found that here on Capitol Hill we move too slowly, but we accelerated the effort so these buildings would be accessible to the handicapped. That is as it should be throughout the country. On a recent occasion Senator Byrd of West Virginia and I dedicated the U.S. Public Debt Building in Parkersburg. Then recently, just a few days ago, we were together and dedicated a city building in Weir~on; the latter building, by the way, built under the revenue sharing program. If money is as well spent. as it was in that project, I think revenue sharing is successful. But we know that in those structures the physi- cally handicapped were considered in planning the dimensions of PAGENO="0030" 24 rooms. We `have to take into account the, hallways, we have to take, into account an elevator that will accommodate the movements of the peison in a wheelchair. I know that these matters are very much a part of your thinking these days. It was not so in years past. But when we consider alterations to a builclin~ to make it more' accessible to the physically handicapped, do you find you have to think in terms of higher costs than you ordifiarily would? Mr. METSEX. To m~dify existing bu~i.idings to make them more acces- sible to the handicapped does incur costs. We anticipate spending about $500.000 in fiscal year I 976 to install the special aids to handi- capped that we feel are desirable in our buildings. We feel that i~ is an absolute benefit to the Government. I think we get a return far in excess of what it costs to make buildings more accessible. There are limitations. In some buildings it is very, very difficult and. very expensive. The CHAIRMAN. Because of the obsolescence of the building itself? Mr. MEISEN. Right. The CT-IAn~rAN. It doesn't adapt itself to change. Mr. METSEX. That is generally true of the old type of buildings built on a pedestal. Generally speaking we find it is not overly expensive to make build- ings accessible. All of our existing buildings have had work done in' them. rfhe CHATIrnAN. Thank you, Mr. Meisen, and thank you, Senator. Senator STAFFORD. Thank you, Senator Randolph, for bringing that: subject up. I do share your interest in it. I know how active and force- ful you have been in looking out for the handicapped in buildings. Mr. Meisen. let me ask you in these cases of purchase contracts that: have been under discussion here, who pays the local taxes if they are paid during the 30 years of time intervened during the actual ac- quisition? Mr. MET5EN. The payments which the Government makes include. the principal, interest, and taxes on all of the proects. Senator STAFFORD. What is the rationale for entering into a purchase- contract construction project costing $165 million I think in fiscal year 1976-in effect. a mortgage not reflected as a. deficit in the budg-- ct-and then returning $55 million in surplus to miscellaneous receipts- from the Treasury? The CIIAIR~rAN. Can I interrupt once again? You understand I am not taking the temperature of Mr. Meisen. I have been taking tempera- tures all over Capitol Hill. and this is no gimmick. I have been interested in dletermininQ whether builclin~s are over- heated. The have generally been overheated, which is au important part of your picture. I find this room this morning is 70 degrees. IVe are trying to keep our rooms in the public works sector of this building at 68 degrees to 70 degrees. 1V~ are finding in some of the rooms in this building, Mr. Meisen. and other buildings, you have 80 degrees, 81, 82, and 83 degrees. So I am sure you are all comfortable here today. PAGENO="0031" 25 Mr. MEISEN. Mr.' Chairmaii, it might be interestingto note that it is estimated by many sources that the potential for energy savings ni existing buildings is approximately 40 percent of the energy we use. We have found in GSA that by simply doing the type of thing you are talking about right now, adjusting the temperature for summer and winter, we can save 30 o'f that 40 percent without any major retro- fitting~ on an average. It true that in ~ome buildings you cannot achieve as much. I think it is a very important program. We certainly heartily endorse your efforts, as well as any private citizens who would want to help the overall energy situation by doing likewise in their buildings. The CHAIRMAN. I think it is a very important statement you are making. I thank you, Senator, for allowing me to pick up the ther- mometer. I am going to another room. Senator MORGAN. I might comment, we propose to have a hearing in the iiear future concerning energy and public buildings. We were talking about that. Mr. MEISEN. Thank you, sir. Senator STAFFORD. Mr. Meisen, since we have been slightly distracted by heat consideration, would you like me to repeat the question? Mr. MEI5EN. I think you were asking why are we not using the $55 million that is being returned to miscellaneous receipts. \T\Te currently have an appropriation limitation in fiscal year 1975 of $1,088 million. We anticipate an income of $1,098 million. We will be returning to the Treasury this year at least $10 million. The limitation was specified in the Appropriations Act that we can- not have obligations in excess of $1,088 million. Senator STAFFORD. One last question, Mr. Meisen. I understand I am asking this question for Senator McClure who would like to be here but has other commitments. I understand that your agency has been asked to participate in the job opportunities program, title X of the Public Works and Economic Development Act. Could you tell this committee whether you have out- lined or submitted any proposals in this area up to the present time? Mr. MEISEN. Yes. We have submitted a proposal to the Secretary of Commerce outlining what things we believe we could accomplish in that program. Senator STAFFORD. All right. I may have some other questions. Mr. Chairman, that. I would submit for the record rather than taking up the witness' time and the committee's time. I would ask the. witness, Mr. Meisen, if answers to any written ques- tions could be made available to this committee within the next 7 days in view of the fact that we have to go to the Budget Committee fry March 15. Mr. MEISEN. We would certainly make every effort to do so. I am sure we can comply, sir. Senator STAFFORD. Thank you very much. Senator MORGAN. Thank you, Senator. Mr. Meisen, many interesting points have been raised that I could pursue all day, but I am going to try to stick to my questions. PAGENO="0032" 26 You mentioned that GSA was sufficiently geared up to accommodate the expanded building programs if sufficient appropriations were made or restrictions lifted. What prospectuses have already been approved that you might use to expa.nd a program? Mr. MEISEN. We only have one new construction project, Norfolk, Va., which has been fully approved in both the House and the Senate. There are many prospectuses for repair and improvement. Pro- spectuses normally run over a long period of time. We have certain ones in that area already approved. Senator MORGAN. What is the project in Norfolk? Mr. MEISEN. It is a Federal office building. Its estimated cost is ap- proximately $14 million. Senator MORGAN. The budget request proposes an expenditure of about $62 million for direct Federal construction. Of that, $29 million is for new work to begin in fiscal year 1976, and the remainder for con- tinuation of ongoing projects. Is this level in your opinion appropriate or will an increase now serve to better fulfill the Federal space requirements? Mr. MEISEN. Senator, I think as far as fulfilling the space require- ments of the Federal Government, that this is not an adequate amount. As for the projection of space needs, this particular chart shows the total space requirements of the Federal Government as far as our egency is concerned for the years 1975, 1977 and 1980. It indicates the growth we anticipate at about 2.5 percent. The red area at the top is leased space, and the blue hatch at the bot- tom is Government-owned space. The growth in Government-owned space was an example to show that if we were to get $300 million a year in new direct construction, how much space we could add to that inventory. The little bar that you see shows how much $100 million a year for 3 years adds to the Government-owned inventory. I think you can see that with the amount of space and the growth that we have, it would take a program in excess of $400 million a year direct Federal construction to maintain the status quo and not have to lease any more. But it certainly wouldn't reduce the lease backlog. [The chart referred to follows:] PAGENO="0033" rE~LJL~\AL S-'ACI:: f~E~~U \dV'~hNT~ o~4r~ ~PT 1t-~ !~ ~ Mr. MEISEN. It is very difficult to equate a single project as having a need simply because of the ratio of space. The order of magnitude of irhat we are talking about is so vast. Tes, we prefer to have Government-owned space, Senator, and we think it should be the goal of the Government to approach to the ex- Lent practical within any ~scal constraints as much federally owned space as is possible as a general policy. I don't think that any 1-year program, in fact, any 10-year program, of any reasonable magnitude is going to make a major shift in the pro- portion of space we now have in inventory. Senator MORGAN. What GSA policies or guidelines determined de- velopment of the program reflected in the budget request now before nS? Flow were cost allocations worked out between the various programs? A5SUME5 `300 M~LLiOM /-\~\NUAL - COHSTRUC. ~ku&~A~1 FY77~FYôO ~~75 50-194----T 5---3 PAGENO="0034" 28 Mr. MEISEN. The chart on your right, Senator,. indicates how we plan to execute our fiscal year 1976 programs. The section on the right is foi~ r~ntal of space at $453 million.This is almost a fixed cost, although it is accelerating because of increases ~ ~p~ce~ both in amounts ot leased space and lease costs because of inflation. The real property operation activity is only increased to the extent we have taken on new Government-owned space and services, but it represents $397 million. So we are talking about two-thirds of our out- lay being in those two areas that are relatively fixed. \~Te have purchase contract payments of some $60 million. We will have payments such as these for quite some time to come. It is a flxed cost even though the amount will vary each year. \~Te have indicated that we felt a larger major repair program was moie desirable, 50 we have allocated SilO million for alterations and major repair, and 563 million for ongoing construction. The program direction area is our supervisory and management staff. It is about 6 Iercent in relation to the total program. IJnapplied revenues is $80 million. This is money that is left in the fund for any additional projects that may ari~e during the fiscal year which might be authorized by the Congress. The $55 million is being returned to miscellaneous receipts. [The charts referred to follow:] PAGENO="0035" 29 lv' ~ FY 1976 ($ IN MILLIONS) g~ ~ ~`~r~'-~ UNOBLIGATED BALANCES FROM FY 19Th $109 PAGENO="0036" 30 PURCHASE PAYMENTS ?T~ ~ ~T? ALTERATIONS AND MAJOR REPMRS $111 Senator T\I0RGAN. Mr. Meisen, would you tell us how the estimate was computed for the transitional quarter between July 1, and Sep- tember 30 of 1976? Mr. MEISEN. Yes, sir. It was computed as simply 2~ percent of all ongoing work at the end of fiscal year 1976, with no new starts con- templated for that one quarter. Senator MORGAN. Over $110 million are budgeted for major altera~ tions and repairs during the fiscal year 1976. Mr. MEISEN. Yes, sir. Senator MORGAN. How could this be allocated to alleviate the Na- ti on's unemployment problem? And I will go further and propose an- other question at the same time. What percentage of that alterations fund will actually be used for new work such as building extensions and equipment upgrading? Mr. MEISEN. The alterations and major repairs activity does not include building extensions. This activity consists only of repairs, ~lteratioims, and modifications to existing buildings. Any major exten- sions are included in the construction program. Senator MORGAN. Are you making an effort to expedite alterations and expenditures of these funds to do anything about or alleviate imemployrnent? PROGRAM DiRECTiON $B7 U~APPLJE[) ~ *r~JL~ MISC RECEiPTS 55 PAGENO="0037" 31 Mr. MEISEN. We will be prepared to move out as quickly as possible as soon as these funds become available. Senator MORGAN. How essential is continuation of the purchase con- tract authority to GSA public buildings program? And another ques- tion along the same line: Doesn't the Treasury's new Federal financing bank preclude further need for this? Mr. MEISEN. To answer the first part, the purchase contract author- ity is critical to our ongoing construction programs. I am concerned that through direct construction our levels of construction are going to be minimal. As I indicated earlier, even at $300 million a year, it is very difficult to see us making any reduction in the amount of lease space we now have. It is likely to grow. I think I might be able to show you a chart that indicates why I think the Federal buildings fund is a technique that can actually help us to reduce some of this backlog. I know this looks a little confusing, Senator, but what it says is, if `we wanted to spend $100 million a year for the next 30 years, one way would be to incur $100 million worth of purchase contracts payments immediately and then pay that off over 30 years. The other way would be to build $100 million of direct construction each year for 30 years. But for the same budget outlay of $100 million a year, using purchase contracts, we could build about 9.2 million square feet of space. For. the next 30 years we would have that space in our inventory. Considering construction escalation, $100 million a year for direct construction over the next 30 years, we could build about 10.2 million square feet of space but it would not all be available until the end of 30 years. What you see under this curve is how much space we will not have to lease for the period of time indicated, at least until 21 years. But the difference is something like $80 million for leasing under the direct Federal construction alternative, as opposed to about $8 million in leasing under the purchase contract alternative. In addition to that, we will be paying 18 percent taxes to the local communities for those 30 years, which I believe represents something like $540 million to these local communities over 30 years. I agree there are many different ways you could look at this. But `what I am saying is for a given output of purchase contract payments, we can get more space on board now and in addition pay taxes~ which `we think is a desirable feature. By the way, if it is decided by the Congress, it is not necessary or desirable to pay taxes, the rel ationship changes slightly because of inflation and what it does each year to the construction dollar. Senator MORGAN. Mr. Meisen, could you give us the assumption on `which you based this chart? Mr. MEISEN. I would be very happy to give you that. Senator. Senator MORGAN. If you would, for the record, we would appreciate that. Mr. MEISEN. Certainly. {The chart referred to and the additional information requested follows:] PAGENO="0038" 32 t~1 ~Df~ I A ~ = ~ i"~7-~ ~ ~ ~ ~ \`~ i ~ ~ ~-` `~` I -~ I \/~ )i~~Ci cC~~ `~ U C1 Q~I (A~SUME~ ~>i~~O i~L. L~a~L. ~ E~i 6O.~ ~ LEA~EJ)~ 0 E~5TIKI~ ~OVT `~ 5si AssUMPTIoNs (Related to Graph Depicting Purchase Contract Versus Direct Federal Construction) 1. An annual appropriation of $100 million is available each year for thirty years for (a) Direct Federal Construction or (b) Purchase Contract payments of principai, interest and taxes. 2. Construction costs escalate at 10 percent per year compounded. 3. There is a zero construction period so that construction initiated in any one year is occupiable during that year. 4. The principal amount borrowed for purchase contract financing is amor- tized at S percent in equal annual payments. 5. The annual purchase contract payment of $100 million includes $18 million for taxes and $82 million for payment of prii~cipal and interest. 6. Annual payments of principal and interest of $82 million at 8 percent for 30 years will produce ~923 million worth of construction in year zero. 7. The gross inventory increases approximately 4.8 million square feet per year. 8. There is $923 million worth of purchase contract construction authorized and ready for construction in year zero. MIL V F: ~. i~ Ld \; ~ PAGENO="0039" FL LUL~ ~ F! 1375 ($ IN MLUONS) PURCHASE CONTRACT PAYMENTS $10 ALTERATIONS AND MAJOR REPAiRS $90 FROM FY 1975 REVENUE 21 FROM PRIOR YEAR BALANCES CONSTRUCTION $2~ FROM FY 1975 REVENUE ~ FROM PRIOR YEAR BALANCES * IJNODLIGATED BALANCES FROM PRIOR YEARS $151 LTAT~O~ ~J VE~IIJ~ ~)1Ie~3 MISC RECEIPTS $10 L. UNAPPLIED REVENUES $4L ~i) pc~~ ~ ~*1) ~C~Cf) 0 CD ~ CD PAGENO="0040" TTc\~ ~ ~ 5 YEAR WORKLOAD INVENTORY ESTIMATED COST AT BEGINNING OF F'! 10Th - $065.5 MILLION BASIC WORK TO CORRECT DETERIORATION AND MALFUNCTIONS $444.1 MILLION SPEE!AL AIDS TO TIlE IIANDICAPPEO $5.2 MILLION SPECIAL ENVIRONMENTAL PROTECTION MEASURES $5.1 MILLION FIRE PRLVENTIO~, L!FE SAFETY ANOPROPERTY PROTECTION *$~2l.,4 MILLION CA~ -SPECIAL ENERGY CO~ISERVATION MEASURES $36.0 MILLION PAGENO="0041" 20,000 25,000 20,080 15,000 r~ 10000 5,000 4~000 3,000 2,000 1/000 cRr~ATE ~N VAT~ ~CTĐF~ (GONSTRUCTION ANO ALUEO INDUSTFUES) 0~ 0 50 75 100 .280 MILLiONS OF CONSTRUCTION DOLLARS NOTE: FOR ALTERATIONS AND MAJOR REPAIRS, INCREASE THE MAN?EARSFIYE TIMES PAGENO="0042" 36 FY76 ~ $URV~( *LOc;~flO~j~~ ~ 4-BOO t,~t.~flcN~J6 ~A~'1PL~ 2A~OD ~ ROrGHTPI ~t1~L'~ `ir in ~ ~UR\!EYEP c~&6~F1CtTIO~1 ~{~1T[~'~ ~JO. O~ (~AT~GORI~ ~ f(OTht~4 ~NTER~J~L ~6A 6S{6TEM TWO~T~R ~6TEM (R[~IUCE RATE~ FOR TiW~ ~ cJPAC~) V ic. PAGENO="0043" 37 I,~fl~iTA~O~ LE~fl~LS Y*15Th VS if 1V7~ .~- OHAIVGE FROM FY15 TO FYTh El p.~. L~5r~ 2~ H U .6.lTj' ILl ~ ~OLLA~ 1Y 1E~4 - FY 1974. Ci~ C~iN~TWJCT~N FY 1Y~4 - fY1574 Senator MORGAN. I was going to ask you to digress for a moment. You keep referring to paying taxes on buildings that the Federal Government bull(iS with Federal-what do you call it? Mr. MEIsEN. Purchase contracts, sir. Senator MORGAN. Who made the decision to pay those taxes? Mr. MEISEN. Congress provided in the Public Buildings Amend- ments of 1972 that these projects would be subject to real estate taxes. It was envisioned that we would fluance these buildings with private sector funds and that title to the buildings would renmin in the private sector until the Government completed payilig for the buildings. lENTiL OF TiLL CONSTFUCTIOO FURCILNOT SPiCE iLUPUPTY COUTTACT OPEF.TTIOTS FAYNIENTS ).LTETTT!OFTO POSITS OLD ,STJON EECTON DC-FAIlS UPIAFPLIET tTSCELIAIVEGVO OfDL~UUS F.ECEFTS PAGENO="0044" 38 lYe. have since found it more economical to finance these proj~ct~ lthrough the Federal Financing Bank under an arrangement that con- tinues to allow the buildings to be subject to real estate taxes. We could. have structu.re(i this program SO as to eliminate real estate taxes, bUt we did not be]ieve that the Congress intended that we should do so. Senator MORGAN. I am not necessarily complaining because I know how the local governments need the taxes, but I just wondered On irhat basis it. was made. Mr. MEISEN. That was the basis. Senator MORGAN. Let me go back to our line of questions. Would you Provide us, for the record, a list of proj ects which you think could. begin within, sa, the next 6 to 18 months? Mr. MEISEN. Repairs and alterations projects? Senator MORGAN. Yes, sir. Mr. MEISEX. We would he happy to do that, sir. [The information requested follows:] PAGENO="0045" FISCAL YEAR 1976 CONGRESSIONAL BUDGET ~ACK-UP ALTERATION AND MAJOR REPAIRS-$250 MILLION PROGRAM, LIST OF PROJECTS BY PROGRAM AREA OVER $100,000 Alabama: Anniston, FB CT Pirminghasi, FB CT Gadsden, FB CT Mobile, ED Ci Montgomery, P0 CT Opelika, FB CT Tuscaloosa, FB CT Alaska: Anchorage, Alaska Mutual Arizona: PhOenix, PB Ct~ California: Los Angeles, CT Los Angeles, PB (6th St.) Los Angeles, FB (L.A.) Menlo Park, USGS Sacramento, FB (Eye Si.) Sacramento, PB (650 CM) Sacramento FB (Cottage W) San Diego, BS San Francisco, AS San Francisco, CU San Francisco, FOB Sai ~[4i~~~1į9 P9 9T.-----~- Basic work Special fire to correct Improvement prevention, Special en- Special Proposed deterioration of space to life safety, Special aids vironmental energy fiscal year and mal- promote and property for the protection conservation 1976 functions utilization protection handicapped measures measures Description $161, 300 $116, 500 $9, 000 $35, 800 New boilers, handicapped facilities, fire pro- tection, space renovation, 443, 500 105, 700 337, 800 New windows, space renovation. 150, 500 150, 500 Space renovation. 436, 400 $44, 800 391, 600 Space modetnizafion. 257, 600 141, 100 $44, 800 71, 700 Roof repairs, interior repairs, handicapped facilities. 312, 700 109, 1300 179, 200 23, 700 Space renovation, general repairs, handicapped facilities. 223, 600 71, 700 134, 400 17, 500 lnterisr painting, space renovation, handicapped facilities. 116, 500 116 500 Backfill vacated space. 836, 100 46, 100 338, 200 851, 800 Ruolace light fixtures, sprinklers, new freight âlevator, power basement door, interior paint. 1, 452, 600 130, 700 1, 233, 000 887, 900 Piping, heat exchangers, cooling towers, sprin- klers, emergency Comm unication system. 331, 5011 331, 500 Install ceimtral air conditioning. 2,0/9,000 338, 200 1, 740, 800 Initial space alterationa, sprinklers, emergency comm onication system, elevator firesafoty. 424, 900 424, 900 Install central air-conditioning buildings 1 and 2. 179, 200 179, 200 Fire subdivision. 912, 800 290, 400 297, 700 324, 700 Fire subdivision, emergency communication, replace switchboard and lights, upgrade courts 1, 2, and 3. 143, 200 140, 700 2,500 Interior painting, exterior painting and caullaing~ 111,300 $111,300 Improve drainage. 1, 432, 400 221, 000 936, 300 275, 100 Fire subdivision, emergency communications, fire protection, suspended ceilings, improved fighting. . 750, 100 57, 700 227, 800 464, 600 Repair windows and doors, new lights, ceilings and toilets; painting; improved fmresafety. 1, 280, 800 640, 400 153, 300 487, 100 Replace emergency generator, paint:ng, improved firesafety; replace ceilings and lights, install two elevators. ~61~ 3QQ ~21~ 200 . - - . .~ ~ 100 Replace mosaic tile, repair exterior terra cotta, iepL1~o tl13at etchanRer, PAGENO="0046" $291, 200 $291, 200 Interior painting. 277, 800 $277, 800 Initial space alterations. 574, 400 168, 500 $405, 900 Roofing and insulation, rewire and revise ware- house lighting. 1, 272, 900 $189, 400 1,083, 500 Install door shelters, skylights, sprinklers, revise lighting. 1,894,200 1,894, 200 Firesafety, subdivisions, smoke control. 431, 400 88, 100 228, 000 48, 500 $66, 800 Office excellence, firesafety, interior painting, elevator fire capture control, improved lighting panels, handicapped ramp and entrance. 5, 969, 000 1, 876, 000 2, 877, 200 343, 100 63, 800 $30, 100 778, 800 Steamplant improvements, extend road, improve electrical systems, modernize space, interim occupancy costs, handicapped facilities, im- proved firesafety, initial tenant alterations. 138, 000 138, 000 Elevator and toilets for handicapped. 237, 400 192, 600 44, 800 Fire subdivision and facilities for the handi- capped. 353, 900 353, 900 Alterations for the courts. 309, 100 35, 000 9, 000 265, 100 Cleaning, weatherproofing and paiiiting, improve fire protectien, handicapped facilities, sep. crate air-conditioning system for after-huui ope ration. 443, 500 98, 600 321, 200 23, 700 General repairs, painting, handicapped facili ties, space renovations, fire protection. 156, 800 156, 800 Painting, repairs, landscaping. 313, 600 89, 600 179, 200 44, 800 Painting, waterproofing, space renovations, han- dicapped facilities. 353, 500 107, 500 134, 000 112, 000 Interior paint, handicapped facilities, replace floors, install sun-glare windows. 402, 300 402, 300 -, Construct courtroom and judge's suite. 902, 000 902, 000 Construct facilities for courts. 445, 300 266, 100 44, 800 134, 400 New heating system, for efficient operation fire protection handicapped facilities. -. 264, 300 85, 100 44, 800 134, 400 Auxiliary air-conditioning to avoid excessive energy consurnl)tion, clean exterior, interior painting, handicapped facilities. FISCAL YEAR 1976 CONGRESSiONAL BUDGET BACK UP ALTERATION AND MAJOR REPAIRS$250 MILLION PROGRAM LIST OF PROJECTS BY PROGRAM AREA $100000-Continued Proposed fiscal year 1976 Basic work to correct deterioration and mal- functions Improvement of space to promote utilization Special fire prevention, life safety, and property protection Special aids for the handicapped Special en- vironmental protection measures Special energy conservation measures ~. * ~ Description . . Calif crnia-Continued San Francisco, FB CT San Francisco, 211 Main South San Francisco, FSC Stockton, FSC Colorado: Denver, FB CT - Denver, FB CU Denver, FC Glenwood Springs, FB Connecticut: Hartford, FB CT New London, CT PD Florida: Gainesville, FB P0 CT Pensacola, P0 CT Perrine, RNAS Tampa, FB CT St. Petersburg, FB West Palm Beach, FB P0 CT Geoigia: Atlanta, P0 CT East Point, FRC Macon, FR CI PAGENO="0047" 6avannah, FB CT- Savannah, FSS Depot Illinois: Chicago, CU Chicago Railroad Retirement Bldg Chicago, FB (536 South ClarK) Chicago, Dirksen FB Iowa: Des Moines, CT Fort Dodge, FB P0 CT Kentucky: Covington, IRS Franklort, FB Louisville, FB Maine: Eostis, BS Portland, CU Chicago, FB (1819 Pershing) Chicago, FSS Depot Indiana: Indianapolis, FIll CT Jeltorvonvrlle, FC New Haven, FSS Depot South Bend, P0 CT 4113, 200 206, 1110 134, 4110 62, 700 ~ Slructural rcp3ir, interior paint, general repaifO, handicapped facilities. 132, 200 87, 400 44, 800 Pave roads and install fire doors. 742 000 238 900 238 600 239 600 24 COO Emergency generator space alteration and modernization, improve firesafety, roof insulat- ing and window repairs, elevator conversion. 116, 800 116, 800 Elevator capture and emergency PA. 1, 272, SCO 196, 800 173, 700 345, 300 556, 500 General repairs, painting, renovate elevator lobbies and cabs. boiler repairs, improve firesafety, convert No. 9 elevator. 1 062 260 157 SCO 5 5 ~ff3 304 400 64 000 Air condition basement improved air condition ing controls, exterior painting, re-key building, provide central controls for heating, construct new courtroom, cross-connect compressors. 254, 203 17, 200 86, 000 151, 000 New dock doors, interior point, elevator conver- sion, new standpipes, sprinklers. 131, 900 131, 900 Road repairs. 108, 400 35, 800 72, 600 Elevator conversion and fire capture system, en- close stairwells. 271, 500 156, 800 114, 700 Roofing and insulation, replace windows to stop air leakage, fire alarm system. 1, 055, 200 1, 055, 200 Roof repairs. . ps. 2, 852, 700 2, 797, 700 55, 000 Elevator repairs; install panic hardware, repair lobby floor, carpeting, cleansing and pointing, repair parapet flashing, elevator capture sys- tern fire alarm, convert postal space to general purpose office space, upgrade court facilities. 191, 700 58, 200 .. 41, 100 5, 400 87, 000 Clean and weatherproof masonry, repair parking, elevator capture, air-condition penthouse, re- place windows to step air leakage. 324, 400 241, 200 69, 800 13, 400 Replace chiller, masonry repairs and weather- proofing. interior painting, elevator capture. 252, 300 252, 300 Space renovations. 170, 600 134, 200 35, 800 Interior painting, handicapped facilities, air- conditioning. alterations. 444,200 206,600 237,600 Fire protection, mechanical alterations. 112, 1300 112,000 Cannpy alterations. 334 200 31 200 201 600 75 300 26 100 Painting air conditioning roof insulation re pairs replace floor covering stiirw~y rail restoration, fire safety wall. 121, 000 109, 000 12, 000 ~- Initial tenant alteration. 529, 900 478, 600 53, 000 Do. 161,300 145,300 16,000 ~ Do. Maryland: Silver Sprrng, Wms. Bldg S Iser Sprirg, Wiliste Bldg Silver Spring, Robin Bldg PAGENO="0048" FISCAL YEAR 1976 CONGRESSIONAL BUDGET BACK-UP ALTERATION AND MAJOR REPAIRS---$250 MILLION PROGRAM, LIST OF PROJECTS BY PROGRAM AREA OVER $100,000-Continued Massachusetts: Andover, IRS Boston, AS Boston, CU Boston, J. F. K Boston J. W. McCormacK -ligham, FSS Depot Springfield, FB CT Worcester, FB Michigan: Battle Creek, FC Detroit, FB CT Flint, FB CT Port Huron, FB CT Sault Ste Marie, FB Minnesota: Minneapolis, FB CT Mississippi: Vickshorg, MRC Vicksburg; PD CT Missouri: Independence, Truman Library Kansas City, FB (East 12th) Basic work Special lire to correct Improvement prevention, Special en- Special - Proposed deterioration of space to life safety, Special aids vironmontal energy fiscal year and mat- promote and property for the protection conservation 1976 functions utilization protection handicapped measures measures Description $358, 400 $358, 400 Roof insulation. 268, 800 $268, 800 New passenger elevators. 365, 600 $139, 800 $46,600 ~112, 000 67, 200 Interior paint, elevator firesafety, convert to purchased steam, toilet modernization. 806, 400 358, 400 268, 800 179, 200 Fire subdivision, recycle condensate. 1, 283, 400 644, 000 156, 800 482, 000 Paint, emergency communications, fire doors, air-conditioning duct and fire control, hand- rails. 559, 200 451, 000 108, 200 Approach repairs, install siding, fire walls inte- rior paint. 134, 400 134, 400 New stairwell, fire alarm system. 112, 000 112, 000 Replace roof and insulation. 1, 004, 800 467, 700 451, 000 75, 300 10, 800 Elevator conversion and capture system, sprin- klers, painting and sealing, toilets for liandi- capped, piping repairs. 6, 057, 500 370, 200 5, 378, 000 191, 700 117, 600 Replace roof and insulation, doers, steps and landings, sprinklers, emergency power, elec- tric repairs. 125, 400 35, 800 89, 600 Replace windows to reduce air leakage, space modernization. 125, 400 125, 400 Space modernization, 577, 300 577, 300 Install new elevator, modernize space. 107, 500 107, 500 Emergency power and PA system, fire sub- division. 174, 700 129, 700 45, 000 Roof repairs, and insulation, interior painting, plumbing repairs. - 340, 100 205, 700 107, 500 $26, 900 New tire stairs, handicappeil facilities. 388, 900 249, 000 16, 200 $29, 200 94, 500 Install drain tile, interior point, replace roof and insulation, thermopano windows, carpeting, ropairs to walks, curbs and entrance, 2, 958, 600 406, 300 1, 641, 400 576, 400 334, 000 Repair roof and insulation, paint, carpet, space alteration and modernization, elevator capture, fire doors, window repairs (catkiiig). PAGENO="0049" Kansas City FB (1500 East Bannister) - 9, 330, 700 Montana: ~ Bdlings, FB CT- Missoulo, FF3 PU CT ~ Missoula, FB Missoola Nebraska: Omaha, FF3 P0 CT New Jersey: Camden, P0 CT New York: Albany, P0 CT New Yoik, FB CU CT Now York, FF3 (201 Varick) New Ynik, FF3 (20 Wash) North Carclina: Asheville, FF3 Asheville, P0 CT Greensboro, PB Greensboro, FR CT Raleigh, FF3 (New) Rolnigh, FB (Old) North Dakota: Minot, FBCF Ohio: Canton, FTB Cincinnati, P0 CT Cslembos, FR CT Toledo, FR Warren, FSS Depot 5, 527, 800 793, 800 320, 800 200, 300 2, 488, 000 Replace reef and indulation, install security fence, replace sewer primp station, improve firesafety, replace leaking water name, replace obsolete circuit breakers, replace heating and cooling coils. 108, 700 91, 100 12, 600 5, 000 Interior painting, handicapped doors, elevator fire capture. 283, 400 258, 300 25, 100 Lighting, parking, elevator fire capture. 172, 500 77, 700 94, 800 Interior palisting, resurface parking, handi- capped facilities. 310, 900 198, 900 112, 000 Roof and insulation replacement, interior paint- ing, masonry repairs: 2, 798, 90O 276, 300 1, 969, 300 525, 700 27, 600 Alteration and modernization, of space, install air-conditioning, improve firesafety. 1, 918, 600 655, 600 1, 078, O0O 156, 000 29, 000 Modernize space, toilets. and elevators. 785, 600 420, 600 140, 000 225, 000 Construct pistol range, interior painting, median- ical alterations. 12, 815, 600 1, 604, 000 10, 983, 600 228, 000 Install air-conditioning, new lighting and modernize space. 930, 000 385, 000 475, 000 70, 000 Modernize space and elevators, install air-con- ditioning, new ftnors, improve lire protection. 223, 900 80, 600 107, 500 35, 800 Interior painting, space renovations, facilities for handicapped. . . 428, 700 267, 500 53, 700 107, 500 Handicapped facilities, general repairs, install auxiliary air-conditioning to preclude use of central system for weekends and after boors. 239, 100 96, 300 89, 600 53, 700 Handicapped facilities; new entrance, interior paint, space renovations. 443, 500 44, 800 114, 500 44, 800 239, 400 Install auxiliary air-condition to preclude use of central system rio weekends, space alterations, interior paint, handicapped facilities. 238, 000 134, 400 49, 900 53, 700 Handicapped facilities, painting, space renova- tions. 259, 700 170, 100 89, 600 Space alterations, handicapped facilities. 118, 600 10, 100 108, 500 Ceiliogs and lights, grading; upgrade court space, air-condition 15,000 ft.2 113, 600 42, 000 55, 600 - 16, 000 Clean, point and seal masonry, replace elevator, calk windows. 167, 600 63, 700 69, 900 34, 000 Repair floors, refrigeration room hoist, firesafety, central HVAC controls. 179, 200 179, 200 Repair roof, esplanade and retaining well. 13t, 700 131,700 Fire subdivision nod fire stnpn. 669, 000 669, 000 Roof repairs. PAGENO="0050" $1, 271, 800 $1, 271, 800 Restoration of building on National Historical Register. 419, 300 256, 400 $134, 400 $28, 500 Masonry pointing and repairs, sprinklers and fire subdivision. 434, 600 217, 300 217, 300 Provide central control for all protection, fire- safety and equipment operation. 179, 200 $179, 200 Install air-conditioning. 380, 800 380, 800 Replace windows. 112, 000 112, 000 Install air-conditioning. 268, 800 268, 800 Structural repairs. 107 500 71700 $35 800 Handicapped facilities interior painting 434, 600 434, 600 Structural repairs. 426, 300 76, 200 247, 100 80, 600 22, 400 Space renovations, emergency power, handi- capperl facilities, fire protection, replace cool- ing tower, paint. 184, 500 103, 900 35, 800 44, 800 Roof° and insulation, space renovation, handi- capped facilities. 223, 500 138, 900 48, 800 35, 800 Space renovation, fire protection, facilities for the handicapped. 170, 000 49, 300 111,800 8,900 Interior paint, plumbing, electrical anil striic- tiiral repairs. 425, 600 425, 600 Emergency power, fire protection for high rise. 11,335,200 1,804,81)0 7, 1311, 700 1, 165, 200 $188, 500 1,040,000 Modernize building and clirninate health and - firesafety hazards and install more efficient electrical and air-conditioning system. 666 000 438 400 178 900 48 700 Fire wills sprinklers and alarms stindpipe roof repairs. 358, 400 35, 800 281, 900 40, 700 Fire doors and alarm, upgrade offices, interior painting, elevator capture. 324, 800 56, 000 268, 800 Interior painting, parking lot drainage. 190, 300 105, 800 8, 700 75, 800 Interior ~3inting, replace coinbustilile ceilings, sprinklers, roof sod general repairs. 388, 800 310, 500 60, 400 17, 900 Fire stair, (l,o,nrs arid alarm; handicapped rdmp~ cleaator ciptiire initial alterations FISCAL YEAR 1976 CONGRESSIONAL BUDGET BACK-UP ALTERATION AND MAJOR REPAIRS-$250 MILLION PROGRHM, LIST OF PROJECTS BY PROGRAM AREA OVER $100,000-Continued V Basic work to correct Improvement Proposed deterioration of space to fiscal year and mel- promote 1976 functions utilization Special fire preveition, life safety, and property protection Special aids for the handicapped Special en- vironrnental protectioinV measures Special energy conservation measures VVV * Description - V Oregon: Portland, CU Portland, FR Portland, FB (Now) Rhode Island: Providence, JEF Providence, FB CT Providence, LB P0 South Carolina: Charleston, CU Charleston, FB Charleston, P0 CT Coliinnibia, Varo Bldg Greeiiville, FB CT Spartanlsurg, FR CT Tennessee: Columbia, PD CT Memphis, FB CT Texas: Dallas, FR (1114 Conimerce) Utah: Cloarfield, FD Ogden, FS Opilen, IRS Salt Lake City, AD Bldg Salt Lake City, P0 CT PAGENO="0051" Washington: Auburn, GSA Center_ Seattle, CT Seattle, FOB Seattle, FB USDS/IMS Seattle, FCS 268,800 626, 900 20,000 15,000 16,000 19,000 23,000 65,000 31,000 15,000 15,000 11,000 Initial tenant alterations. Do. Do. Do. Do. Do. Do. Do. Do. Do. Wyoniing: Casper FB CT 394, 200 394, 200 Paving repairs, floor slats and roof repair 313, 600 313, 600 Construct new jury facilities.. 1, 274, 500 372, 500 586, 300 315, 700 Upgrade space and electrical system, improve firesafety. 268,800 Backlill vacant space. 275, 100 351, 301) Site improvements, firesafety, initial tenant alterations. Seattle, FB (New) 525, 100 224, 000 301, 100 Backfill vacant space. Seattle, AT No. 7 134, 400 - . 134, 400 Initial tenant alterations. Spokane, CT 398, 700 398, 700 Sprinklers, central control panel. West Virginia: Wheeling, FB CT 2, 886, 000 1,706,000 900, 000 90,000 190, 000 Space modernization, improve firesafety, up- . - _. .._ . grade-HVACasid etectricahsystemS~ Wisconsin: Milwaukee, F& CT .._ . 143, 800 28~ 400 _._~-_. 115; 400 ~_:_:_:__~_~__::_:_:.. Emergency generator, fire subdivision, interior paint, sidewalk repairs. 146, 400 54, 900 10, 800 80, 700 Landscaping, convert heating system, paving repairs, painting. Agriculture South 6, 668, 000 3,000, 000 3, 498, 000 170. 000 Firesafety improvements space modernization, upgrade air-conditioning distribution and elec- tical systems. 7, 155, 000 4, 720, 000 2, 435, 000 Additional fuel storage coal pulverizer, pre- cipitators. . 14, 073, 000 7, 448, 000 3, 730, 000 2, 095, 000 800, 000 Modernize space, replace central air-condition and electrical systems and improve firesafety. 354, 000 Modernize space, air-conditioning distribution . and electrical systems and improve firesafety. ~ 12, 628, 000 5, 714, 000 5, 184, 000 1, 130, 000 600, 000 Modernize space, replace central air.conditioniiig and upgrade electrical systems and improve firesafety. 7, 616, 000 6, 776, 000 90, 000 750, 000 Replace central air-conditioning and* upgrade electrical systems and improve firnsafnty. 0,809, 000 622, 000 5,900,000 287, 000 Space modernization, tiresafety, repairs to central air-conditioning and upgrade electrical improvenients. 8,840,000 5, 142, 000 3,698,000 Space modernization, air-conditioning distribu- tion and electrical improvements. 2, 800, 000 90, 000 250, 000 Modernize space, upgrade firesafety, electrical and HVAC systems. Central heating plant GAO GSA, CO 13, 454, 000 10, 395, 000 2, 705, 000 HEW (N) Justice Labor P0(New) Taritf 5,232,1)00 2,092,000 Leaned locations: 2100 K St. NW Railway Labor Vanguard Bldg 1726MSt 711 14th St 4th and I St. NW 20331451 Gelman Bldg Pennsylvania Bldg One McPherson Sq 201,600 152, 300 161, 300 190, 800 230, 300 649,400 313,600 147, 800 152, 3(10 .112, 000 181, 600 137, 300 145, 300 171,800 207, 300 584, 400 282, 600 132, 800 137, 300 101, 000 PAGENO="0052" FISCAL YEAR 1976 CONGRESSIONAL BUDGET BACK-UP ALTERATION AND MAJOR REPAIRS-$250 MILLION PROGRAM, LIST OF PROJECTS BY PROGRAM AREA OVER $lOO,000-Continued Basic work Special fire to correct Improvement prevention, Special en- Special Proposed deterioration of space to life safety, Special aids vironmental energy fiscal year and mel- promote and property for the protection conservation 1976 functions utilization protection handicapped measures measures Description mason locations----Costinued 2000 M St. NW $599, 800 $539, 800 $60, 000 lnitial*tonant alterations. Matomic Bldg 376, 300 338, 300 38, 000 - On. 2025 10 St 179, 200 161, 200 18, 000 On. Brown Bldg 448, 000 403, 000 45, 000 Do. Central Office projects: Eneigy conservation retrofit analysis 5, 300, 000 - - $5, 300, 000 Nationwide study to identify additional energy 01 existing buildings, conservation installations. Pilot test instsllation of computerized 5,000,000 5,000,000 Computerized operating control ~f buildings bA, buildings operation. lOB, FB-9 and Forrostal, Washington, D.C., ~ to test energy censoivatjon and labor saving Ca potential. Solar collector installation 3,550,000 3,550, 000 Test installations of solar collectors to de- termine energy-saving potential. Subtotal 212, 342, 000 $78, 633, 800 78, 047, 100 23, 127, 000 $1, 558, 100 $3, 274, 000 27, 702, 000 Projects under $100,000 04, 680, 700 6, 035, 300 6, 165, 000 1, 318, 300 146,800 l4~ 800 867, 600 Subtotal projocts 227, 022, 700 84, 669, 100 84, 213, 000 24, 445, 300 1,704,900 3, 420, 800 28, 569, 600 Dezige, managenient and inspection 22, 977, 300 Total - - -- -- -- - 250, 000, 000 - - - - -. - - PAGENO="0053" 47 Senator MORGAN. Now back to the other questions. Which of the 63 backlog purchase contract projects included in the fiscal year 1976 budget require an increased authorization? Mr. MEISEN. I believe you mean the original 63 projects that were iii th~e purchase contract program. Senitor MORGAN. Right. Mr~MEISEN. None of them will need additional authorization. There are ~othe that are not underway yet for various reasons. But all of those underway do not. Senator MORGAN. Getting back to the no-year funding which I still have problems with. Wouldn't restoration take away most of the Con- gre~s' control over the building program? We have been thinking* of initiating a two-stage operation pro- cedure just in order to maintain control. I have some questions in my own mind. I would like to have your comments. MI~ MEISEN. We feel very, very strongly that we have to have full project funding. Certainly we are strong advocates of shortening the construction time wherever we can, because we find it not only saves you:money but it saves you changes during the life of the project. But this can only be clone with no-year full project funding. `As t~gencies change they seem to want to change buildings. It is a very expensive process. If we are allowed to proceed with construe- ti~iOf the foundations as I described before, immediately upon their bei'iig' designed, we usually find we can start actual construction work within 4 months of starting the design. Thehistory has been we have been waiting 12 and 18 months before ire put the first shovel in the ground. The whole philosophy of se- quential cksign and construction is being changed now, finally, by my fellow architects recognizing that to an owner it is a very wasteful process to design the last doorknob on the last floor before you begin putting your first shovel in the ground. It requires considerably more planning and a lot more caref iii sched- uling so you know when you award the first contracts what your total contract obligations are going to be. The problem with sequential financing or sequential appi'ovai is that it `dO~sift allow you to do that. I do think there is a need in the Con- gress to' know more about the total project before it authorizes it. We certainly don't want by phased construction to obligate the "Congress to spend more money than it envisioned. We feel we can develop procedures whereby we can give you sufficient detail about what the building objectives and goals are,its size and cost, so that you ~an authorize the project. ~\Te can have enough safeguards that the moment it appears we are going to exceed any of the limitations placed by Congress~ we can, before obligating ourselves, come back to the `Congress and explain where those potential increases miuht be. Senator MORGAN. Is it fair to say~ them that your feeling is that Congress ought to know what it is doing before it authorizes a project? Then, once it authorizes it, in the absence of unforeseen events, we -ought to leave you alone and let you go and do it? Mr. MEISEN. I wouldn't put it that way. I would say I don't know of any major construction agency, both private and public, that does not today use phased design and construction in order to sav~ itself a lot of money. PAGENO="0054" 48 Senator MORGAN. I was not sure if you would agree, but I ~yas~ askino~. 1Vl~t benefits would accrue, in your opinion, from eliminating th~ annual restriction on the repair and alterations fund? Mr. MEISEN. Clearly we have almost $1 billion of repair and altęra~- fions that will have t~ be done at some time or another. The more that we could program those on an ongoing basis, the better off we would be. I think we do have a concern about maintaining a balance in~ ~ overall budget. I don't mean a balanced budget so much, but a balance of priorities. . . I firmly believe that at the present time there is a serious problem in the construction industry. That and the auto industry are probihly the hardest hit industries in the United States. I would be less than candid to think that increase in that activity would not help that program considerably. At the same time I feel we can't keep adding to a 50-some billion dollar deficit. I would think it would be appropriate to balance priorities. If i~ deemed appropriate by the Congress to expand a program sign41~ cantly, that perhaps adjustments would be macIc in the total budget to try to avoid adding to what I think is an astronomical potential d?bt this year. We are talking about the H. & A. program also, as far as no-year funds are concerned. . Mr. DiLuorno. The big advantage to no~year funds in both c~n~ struction and ZR. & A.. Senator. is that under the annual appropria- tions we must use or obligate all the funds that are made available ~to its in the year that they are appropriated or for the designated period of time for which they are appropriated, usually, a single fiscal year. In both construction and ZR.. & A.. some of the projects cannot be financially completed in that given 12-month period of time. What no-year funds do for us is that it allows us to carry from beginning to end. Both ZR. & A. and construction, projects which ha~e been approved both by your committee and by the Appropriations Committee and have been funded in appropriation acts, rather thaii stopping financially in the mididle of those projects audi, as previ~ ously explained by Mr. Meisen, coming back the next year aiicl asking for reauthorization of those same funds again to continue the work on those projects. No-year funding makes funds available on a start to finish basis for authorized ~rojects. Annual appropriations don't do that. Mr. METSEN. It is important. also. Senator, that I am sure you ap- pieciate the budget process starts more than 12 months in advance of the fiscal year in question. What you find us trying to do is predict what are we iiot goilig to finish in that 12-month leriodl so we can include it in a request for reautitorization. It is a very difficult, thing to project. If a project. slips b 1 month and you don't have it in your budget for next year; ~bu find yourself without the capability of finishing a project. Senator MORGAN. Unfortunately, there doesn't seem to be any way to expedite it. in our system. 1-Tow much funds accrued from rent, or from standard level i~sčr charges, do you think GSA should retain for the building'fund if ahy? PAGENO="0055" 49 Mi~. MEXSEN. W~ definitely feel we should have some flexibility.. We had $80. millionlast year. We had requested $80:rniilion to remain as a carryover into fiscal year 1976. We basically think that the $80 million is a reasonable amount of flexibility for any new programs that might come up. There could be a question of whether we should be depositing into the receipts of the Treasury since the funds were paid by Federal agencies for space and services. I would have no objection, of course, to keeping all the re- mainder in the fund, if the Congress considered that appropriate. Senator MORGAN. What is the rationale behind requirlng deposits Iroin this fund each year into Treasury's miscellaneous fund, and what was the original concept? Mr. MEISEN. Mr. DiLuchio will answer that. Mr. DiLuciiio. Th.e original concept behind the deposits to miscel- laneous receipts, developed in conjunction with the Office of Manage- ment and Budget, was an attempt to theoretically compensate for losses incurred by a private entrepreneur, such as taxes, insurance, advertis- ing. and the like, but which we don't incur. However, no provision was made to allow for the costs which ,:we have, that I discussed earlier, which. the private sector does not iiav~ Mr. MEISEN. If the deposits were retained in the Federal buiicliiigs fund, they could be available for programs of GSA construction, other real property programs, R. & A., and even maintenance and operation programs as they are deemed to be necessary. But once going to the Treasury out of the Federal buildings fund, they are lost to the fund as resources to do work in the future forever. Senator MORGAN. You may have already answered my next ques- tion. I think maybe you have. But again for the record, if you would, what is GSA's philosophy with respect to leasing versus construction, and what will be the tendency for the next 5 years? Mr. MEISEN. Senator, as a basic concept I think the GSA prefers to have Government-owned spaces versus lease space. I think also ~s a practical niatter many administrations have seen fit that it was not necessarlly appropriate to charge 1 fiscal year for all of the costs associated with building a 40- or 30-year building. In other words, why should one budget reflect the full cost of Lthe building that is going to be used by the Federal Government and Executive for 30 or 40 years? So there has been a major emphasis I think on the part of the Execu- tive to try and spread costs as opposed to inflating the annual budget in 1 year for direct construction. Given these two positions of the Executive and the Congress, which I know feel strongly in favor of Federal ownership, it is our opinion that the purchase contract program offers an alternative that can in fact satisfy the need and desire for Government ownershi]? and~ con- trol of both the projects and their operation and their design and still not cause the cost of any one project to be carried on in 1 fiscal year, but spread it over the life of the building. Senator MORGAN. Mr. Meisen, some day I would like to have a dis- cussion with you about whether or not any studies have ever been made with regard to leasing' of office space, taking into consideration `the benefits to the counties, and cities, and State, and so forth with regard PAGENO="0056" 50 to taxes, and then taking into consideration what the owners probably pay in income taxes, and then see how that would offset Goverilment ownership. But I don't believe time will permit us to get into that right now. Mr. MEISEN. Yes, sir. :. Senator MORGAN. Let me ask ou~ how many of the lease projects shown in the budget are for buildings yet to be constructed, and which of these have not yet been authorized? Mr. MEISEN. non of the projects listed in the budget are planned for: lease construction. With the exception of Fort. Lincoln. none have been authorized and all are yet to be constructed. The projects are: Fi'esno, Calif., IRS Center Aimex; Washington, D.C., Archives; Washington, D.C., Fort Lincoln; Boise. Idaho, SSA Computer Cen- ter; Boston, Mass., VA Outpatient Clinic; Brookhaven. N.Y., IRS Annex; Philadelphia,. Pa., IRS Center Annex; Austin, Tex.. IRS Annex; Memphis, Tenn.. . IRS Annex: Charlottesville, Va., Federal E~ecutive institute and Managerial Training Center. Senator MORGAN. Charlottesville. Va.? Mr. MEIsEX. Yes, sir. Senator MORGAN. What is the status of your program with respect to proposed deferrals or rescissions by the administration? Mr. MFTsEN. What is the status, sir? Sepatoi' MORGAN. Yes. Mr. METSEN. I anticipate that by Friday the Congress will take no action and we will immediately proceed with those projects as soon as the. money is restored. Senator MORGAN. Mr. Meisen, do you or any of your colleagues have any other statements that you would like to make which will be help- fiil to the committee that you know of? Mr. Mvis~x. I hope I was clear in my answers. I would be very happy to clarify any I was not clear on. I think it should be pointed out that I think there. always will be a need for some leasing because of necessary flexibility that it gives us. I don't see any way, in thenear future. of approaching the amount of Government-owned spaces where we will not need leased space for that flexibility. Senator MORGAN. Thank you very much, and thank you all for your presentation this morning. Mr. Meisen, I think we may have some more questions on behalf of myself and other memhers~ of the committee. IVith your consent, we would like to submit them and get your response for the recorcL Mr. MEI5EN. Certainly. lAdditional questions follow:] QuEsTIoNs Fno~r SENATOR MORGAN Question. 1. Do you not feel that retention of all SLTJC revenue would be ad- vantageous to the continuing federal building program? Answer. The original concent of the Federal Buildinrs Fund was that all income to the fund would he available for obligation by GSA-PBS in earryinr out its mission of providing space to and performina services for Federal agencies. Underlying that concept was program budgeting that agencies should pay for what they get. but that they receive what they pay for. This requires that all income l)e available to PBS rather than being deposited to miscellaneous receipts of the Treasury where it is no longer available for any purpose. PAGENO="0057" 51 Question 2. If we retained all revenue would not a significant income in federal construction activity be possible? Answer. An increase in construction would be possible, but the size of that increase is dependent on the amount Congress authorized GSA to use for' the construction of facilities. Under present income projections as shown in `the budget for FY 1970, up to an additional $135 million could be made available by the Congress. Question 9. Would this not then allow a reduction of the leasing requirements of the federal government? Answer. Increasing the amount authorized for construction would not imine- diately affect the leasing program since Government-owned space to be con- structed would not be completed for about three years. At that time, the amount of space to be leased would of course be lower since agency requests for space could be satisfied by assigning them to the new Federal buildings. QuEsTIoNs FRoM SENATOR BUCKLEY Question. 1. As I understand it, there are at least 30 GSA buildings now under construction across our nation. Most are Federal office buildings, with the remainder serving as Social Seeurity payments centers. The total cost. of the~.e buildings is ~ppio~im'tteh $bOO 000 000 not counting financin.~ 01 Ot iei similar charges. Would you provide us with an updated list of the GSA striic- tu~es now under construction, the current estimated cost of each together with a list of those buildings on which construction is expected to begin before the end of fiscal year 1976. [The information requested follows:] Under construction San Diego, Calif ~42, 454, 000 Santa Ann, Calif 11, 586, 000 Van Nuys. Calif 7. 935, 000 Santa Rosa, Calif ~` 33~ 000 Orlando, Fin 10, 394,000 Honolulu, I-Ia.waii 32, 4S6, 000 Sandpoint, Idaho 2, 410, 000 Indianapolis, md 16, 701, 000 New Orleans, La 32, 192, 000 Baltimore, Md 21, 503, 000 Fitchburg, Mass 4, 815, 000 Detroit. Mich 50, 842. 000 Saginaw, Mich 6, 244, 000 Lincoln, Nebr 18, 195, 000 Manchester, N.H 8, 505, 000 Albany. N.Y 11, 994, 000 New York City, N.Y 59, 369, 000 Syracuse, N.Y 20, 169, 000 Winston-Salem, N.C 14, 416, 000 Akron, Ohio 16, 332, 000 Dayton, Ohio 9, 022, 000 Eugene, Greg 7, 993, 000 Portland, Oreg 21, 977, 000 San ~uan, Puerto Rico 20, 862, 000 Florence, S.C ~ 859. 000 Roanoke, Va 13, 550, 000 Charlotte Amalie, Virgin Islands 6, 485, 000 Richmond. Calif.-SSA 34, 942, 000 Cliicago-SSA 46. 318, 000 Philaclelphia-SSA 29, 269, 000 Question. 2. In addition, GSA last summer prepared a table that shows the effect of the purchase-contract program on just 18 buildings. This show-s that the estimated capital cost of $672000000 w'ill evenutally cost the taxpayers about $2.8 billion dollars between now and the end `of the century. I w-culd ask that this payment schedule be supplied for the record. PAGENO="0058" `Estiniateci Fiscal near amount 19'13 (actual amount)~___ $2, 409, 000 - 7, 300, 000 1975 26, 244, 000 10~6 59, 925, 194 91, 749, 564 1978. 98, 237, 972 1979 102, 135, 004 1980 101, 542, 313 1)81 101, 162, 476 1982 100. 027, 095 1983 100, 958, 795 1984 100. ~ 4s4 19~ 100. 468, 191 19~6 101. 021. 109 100. 054. 843 19~8 100. 428, 016 1089 100, 057, 224 QuEsTIons Fno~r SENATOR STAFFORD Question 1. How many jobs-and at what average wage rate-can be produced los' a $1000000 investment in renovation work, and how does that compare witn 81.000,000 of new Federal construction spending? Answer. This question was answered on page 23 of testimony except for average wage rate which is assumed to be $17,500. Qve.stion. 2. How much space will be leased under the 1976 request for 3452.- `000.000? How much space was leased in the present fiscal year under the current :appropriation of $364,000,000? Approximately how many Federal employees are currently located in leased space during F~T 1975? How many during FY 1976? Approximately how many Federal employees are currently located in GSA-oper- ~ated, Federally owned space? Answer. The $452,000,000 includes approximately $29 million to reimburse the United States Postal Service for space occupied in those buildings by other Fed- cml agencies aiid assigned by GSA. The $424 million (452-28) reflects an est~- mated net increase of 7.9 million square feet of space in the lease space inventory and a year end inventory of approximately 88.2 million square feet. The .3364.000,- 000 composed of $354000000 appropriation and a $10000000 supplemental repre- sents a net increase of 2.6 million square feet and a fiscal year 1975 year end in- ventory of 80.3 million square feet. It is estimated that as of June 30, 1975, ap- Proximately 385,123 employees will be housed in leased space and approximately 470.706 employees will be housed in Government-owned space. It is anticipated that 407,227 employees will be housed in leased space during fiscal year 1976. All figures are exclusive of outside parking.. Question 3. What renovation work is contemplated in the budget? How much renovation could be accomplished by GSA without any budget constraints? How svould you assess the ability to improve Federal efficiency through renovatiou, compared with construction? Answer. The first two questions are answ-ered in the testimony, reference page `7 and 39. It is generally conceded that renovated space is not as efficient as new-ly eon- `structed space, but such space is often more cost-effective and also contributes to our energy conservation program. Question 4. Assuming approval of $161000000 in new purchase-contract spend- -inn this year, u-hat is the estimated total annual purchase-contract payments that will be owed by GSA once those buildings, plus all previously authorized pur- `chase-contract structures, are occupied by the Federal Government? 52 [The information' requested follows:] Projections of payments of principal, interest. and taxes related to purchase * contracts pu.rsuctnt to the Public Buildings Purchase Contract Act of 1954 * and the Public Buildings Amendments of 1972 Estinmatcd (11110 nut 3100. 184. 879 1991 100, 174, 9135 1992 99, 998, 020 1993 99, 702, 8013 1994 99, 308. 772 1995 98. 890, 842 1996 98, 331, 116 1997 97. 760. 782 1.993 97. 977. 827 1909 98. 578. 850 2000 OS. 801. 943 2001 98, 763. 885 2002 OS. 482. 494 2002 85. 578. 521 2004 37, 836. 571 2005 hi, uOO PAGENO="0059" 53 YPThe information requested follows:] PRWECTED FUNDING REQUIREMENTS ON A FISCAL YEAR BASIS TO FINANCE PURCHASE CONTRACTS AWARDED UNDER THE 30-YEAR -PROGRAM AUTHORIZED BY THE PUBLIC BUILDINGS AMENDMENTS OF 1972' Estimated Estimated Estimated principal and taxes and totaL Fiscal year interest assessments payments .. 1975:_ $6, 421, 229 $7, 405, 305 $13, 826, 534 1976 38, 301, 857 19, 193, 780 57 498, 637 Transition period 15, 989, 030 10, 434, 879 26, 423, 909 1977 74, 280, 928 13, 140, 690 92, 421 618 1978 94,654,418 - 23,447,580 118,101,998 1979: 109,924,472 29,357,317 139,281,789 1980 124,090,502 29,270,471 153,360,973 1981 129,089,766 32,552,819 161,642,585 1962 124,704,718 33,529,063 158,233,781 1983 124,497,209 34 534, ~ .158, 031, 743 1984: 124, 168, 554 35, 570, 571 159, 739, 125 1985:: 123, 401, 104 36, 637, 518 160 038, 622 1986 124, 347, 864 37, 736, 733 162, 084, 597 1987 123, 664 327 38 868, 540 162, 532, 867 198~_ 124,015 364 40 034 447 164 049 -811 1989L::_ 123,571,455 41,235,673 164,807 128 1990 123,308 698 42 472 751 165 779 449 1901 123,181,996 43 747,118 166,929114 1992 122,908,802 45,059 014 167 965,816 1993: 122, 452, 183 46, 411, 083 168 863, 266 1994 122,057 772 47 803. 675 169 861 447 1995 122, 148, 740 49 238 244 171 386, 934 1996 120, 233, 240 50, 715, 348 170, 948, 588 1997 119,544,206 52,236,450 171,780,656 1998 120,072,884 53,803 919 173 876,803 1999 120, 542, 133 55, 418, 527 175, 960, 660 2000 120,701 502 57,080,652 177,782,154 2001 120, 505, 996 58, 792, 878 179 298, 874 2002 119 955 609 60 556 793 180 512,402 2003 106, 574, 303 40 085, 420 146 659 723 2004 55,203 638 23 520 133 78 723 771 2005 18,189,732 12,601,425 30,791,157 `Includes 4 unfunded projects. Question 5. What are GSA's projections on the expected need for additional 1ett~ed and purchase contract space during the coming five years? Answer. Based upon an average increase in Federal employment of about 21/a percent annually for the past few years, it is estimated that space under GSA control will increase from an estimated 236.4 million square feet of space at the end of Fiscal Year 1975 to about 261 million square feet by the end of Fiscal Year 1950. Our purchase contract authority expires on June 30, 1975; however, if the purchase contract authority is extended. it w-onld be used to the maxisnumu extent `~ossib1e to reduce GSA's leased inventory. At the present time this in- ventory is about 34 percent of the 236.4 million square feet estimated at the end -of Fiscal Year 1975. All square foot figures are exclusive of outside parking. Question 6. What is the average amount of office space available to a typical Federal employee? How does that compare w-ith the average in industry? What axe these averages for New York City? Answer. The average amount of office space used by a typical Federal employee would be 130 to 150 square feet per person depending upon his responsibilities, amount of necessary equipment, and other factors. Although, industry averages are not readily available the amount of space used per person has been estimated to be approximately 165 square feet. In New York City GSA assignments approxi- mate 150 square feet per person. The averages for industry in New York City are estimated to be slightly higher. Question 7. How much does GSA include for `management and inspection" in its prospectuses? What does this category specifically pay for? How often, and under what circumstances, does GSA contract-out such work? Answer. GSA includes an amount for management and inspection varying from 7― percent for a $1.0 million contract to 31~ percent for a $20.0 million contract. This catagory pays for (1) inspection services at the site, (2) GSA's management ef. time project during construetcon, (3) trav~l to and from the site by GSA per- PAGENO="0060" 54 sonnel, (4) testing services during construction and (5) estimating and negoti-- a lions of change orders. GSA's policy is to supervise new construction projectss with its own staff to the niaxianoum extent possible. We estimate that 50 jnncent of our inspection is done by Architect-Engineer contractor personnel for GSA projects where in-house personnel are not availaLle. * Question S. What improvement has GSA made in operating and servicing offices since the institution of the SLTJC charges? Answer. GSA has improved cleaning and protective services levels to tenant agencies and we have increased the level of our repair and alteration program including tenant alterations. Question 9. What has been clone to meet the recommendations of GAO report B-11S623 dated February 28. 1972, particularly as they relate to preventative- maintenance, cleaning, and painting? Answer. With the implementation of the FBF. we were able to more readily achieve the recommendations of the GAO report B-118623 as it relates to provid- ing services to occupants of Federal buildings on a uniform and equitable basis. Under the FBF, it was determined that GSA would provide all agencies a corn- mercial equivalent level of service. This service l1as been provided on a uniform basis throughout fiscal year `75 as far as possible within the funds available for tile operation and maintenance of real property. Our preventative maintenance program has been funded in accordance with our work measurement standards. The cleaning program was funded and operated in fiscal year `75 at an increased; level. A common five year office painting cycle was established in December 19.63, however curtailed A&MR funding has resulted in painting not being accomn- pushed in accordance with this schedule. The energy crisis has also necessitated a re-evaluation of the practice of painting after normal duty hours which was' recommended in the Report. Consequently, painting is now accomplished during daylight hours wherever possible. In order to assure compliance with regulations on paint procurement from FSS, recommended in the Report, GSA has recently issued a directive freezing pro- eureinent of non-FSS paint. Further, our inspections indicate that there have- been no further violations in this regard. Questions 10 and 11. The series A through I of the Public Buildings Purchase Contract and Trust Indentures totaled $091,000,000. What was the total sum- raised from the issuance of GSA participation certificates to finance various purchase-contract projects? What rates of interest did these participation certif- icates carry? [The information requested follow-s:] Percent Amount Series A: Detroit, Mich Series B: San Diego, Calif Series C: Lincoln, Nabr Series 0: Indianapolis, led Series F: New Orleans, Ln - Series F: Honolulu, Hawaii, New York, N.Y., Syracuse, N.Y., Akron, Ohio, Portland, Oreg., San Juan. P.R Series G: Richmond, Calif., Chicago, II., Philadelphia, Pa Series H Series I: Snnta Rosa, Calif., Orlande, Fla., Atlanta, Ga., Baltimore, Md., New Bedford, Mass., Ann Arhor, Mid., Wiastos.Srlsm, NC., Manchester, N.H., Columbus, Ohio, Dayton, Ohio, Oklahema City, 0kb., Eugene, Oreg., Williamsport, Pa., Florence, S.C., Roaneke, Va., Charlette Amalie, V.1 7.~0 7. 30 7.25 7.20 7.125 7.15 7.50 8.10 8.325 Ģ65,303,000 48, 803, 000 25, 103, 000 22, 703, 000 34, 600, 000' 201, 000, 000 126, 003, COO' 71, 000, 000' ` ` 98, 003 000' Question 12. What organization is listed as the official ow-ncr of the buildings during the 30-year purchase-contract period? Answer. Under the terms of each Indenture for Series A-I. the trustee holds. title to the improvements as constructed. First National City Bank is our trustee for each of these Indentures. Question 13. Who, specifically, pays tlue local property taxes as private ow-ncr' during that 30-year period? Answer. Under the terms of each Indenture, the Government (GSA) u-hi pay or cause to be paid all real estate taxes on all iassprovements and the trustee's: leasehold interest in the sites at all times until the purchase pricc in-i.c been `paid~ in full. PAGENO="0061" ~)uestion 14. I understand that GSA has some 30,000 square feet of vacant sp i~e under le'ise in the W ainel Building in W i~limgton D C let GSA c~ys the space is ~`not suitable for occupying without extensive alterations." Could you please provide data on when GSA obtained this space, the annual cost, the length of the lease, past occupants of the space, and present costs of upkeep on the building. What is the estimated cost to renovate this property for the Trcasury Department? Answer. On February 2, 1973, the 6th through the 11th floors of the Warner Building being approximately 59,562 square feet were leased for the Treasury Department for a firm ten year period at an annual cost of $330,500 fully serv4ced. The Department of the Treasury has been the only occupant of parts of this space. Space layout plans for the entire area were delivered to owner on March 12, 1973. These space alterations were estimated to take nine months. 1-lowever, on July 30, 1973 the Department of the Treasury informed GSA that they did not need about 30,000 square feet on floors 6. 7, and 8, in the building. Attempts by GSA to assign this space to other activities were unsuccessful. Mea~iv1iile alterations on the upper three floors were completed and the space occupied by Treasury on January 7, 1974. GSA was contractually obligated to pa y: rental on all six floors at that time. Subsequently, in February 1974, it was decided to house the newly created Federal Energy Office in the new Post Office Building in space planned for occupancy by Treasury. Treasury then agreed to house certain Internal Revenue Service elements in the WTarner Building on its 6, 7, and 8th floors. Final review of space layout plans were not completed by Treasury until August 1974. Renovation of these floors will be completed by March 30th and the space will be occupied by IRS at that time. `l1he cost of space alterations for the Department of the Treasury are a part of the lease agreement. The government has paid about $16,000 for a special pur- pose laboratory not included in the lease and about $53,000 due to the inflation re~nlting from delay in authorizing tenant alterations to floors 6, 7, and 8. `Approximately $90,000 is included in the annual rental for utilities, janitorial seivices and maintenance. Question 15. What is size of GSA guard force today? What was it in 1966? How does that percentage growth compare with the growth in space under GSA comitrol? Answer. The guard force increased from 2917 on-board as of June 30, 1960 to an on-board strength of 3,841 as of June 30, 1974. Over the same time period space under GSA control increased from 194.4 million square feet to 231.4 mil- lion square feet. This represents an increase of 32 percent in the guard force while space under GSA control increased by 19 percent. Question 16. What effects have occurred as a result of Executive Orders 114:58 ~incl 11625 relating to leasing of Federal space under the minority enterprise program? Answer. Executive Orders 11458 and 11625, of March 5, 1969, and October 13, 1071, relating to time promotion of minority enterprise prescribe arrangements for developing and coordinating a national program for minority business enter- prise. However, these issuances have had no discernable effect on our leasing programs. ~ppe Secretary of Commerce is charged with carrying out the functions of the E.O.~s and the heads of other departments and agencies assist amid participate iii all ways appropriate in carrying out the objectives of time orders to the extent permitted by law- and the availability of funds. GSAs authority to im~1eaee space under section 21Oh(1) of the Federal Property and Administrative Serv- ices Act of 1949, as aniended, is on a competitive basis and has no set-aside provisions for leasing space from minority business enterprises. The outleasing of space is limited to those situations where government-owned space is tem- porarily surplus to its needs; however, the l)roviSiOn of Section 203 of the 1949 Act would control and require sealed bids. The exceptions to the sealed bid procedure under subsection (e) (3) would not permit a miegotiated disposal to minority enterprises. `Question 17. How much of the SLTJC revenue is scheduled to be returned to the ~i~asury in fiscal year 1975? How much does the Budget return to the Treasury in fiscal year 1976? PAGENO="0062" 56 Answer. $10 million of SL[C revenue is scheduled to be returned to the Treas- ury in fiscal year 1975. $55 million of SLUG revenue is scheduled to be returned to the Treasury in fiscal year 1976. Question 18. How much is set aside for Program Direction? Answer. $63 million is included for Program Direction in fiscal year 1975. $67 million is included for Program Direction in fiscal year 1976. Question 19. Does GSA have sufficient personnel? Answer. In the area of our Construction Program we will require additional technical and administrative personnel with the advent of a sizable increase in our work-load. We understand that the House Appropriations Committee,: in developing an unemployment program, may propose legislation that would make 8465 million available to GSA. This would be for GSA to undertake immediate construction and repair and alterations of public buildings in hundreds of loca- tions across the country. Question 19a. Is GSA forced to contract out any of its Program Direction or Management and Inspection on individual projects? Answer. As a matter of policy and procedure, GSA will normally contract-out time management and inspection of projects when our staff is already assigned to capacity. This, again, is a function of the size of our construction program. Our contracting-out is usually in the area of the multi-million dollar projects. Question 19b. Would GSA save money if it did any of this work in the agency? Answer. The cost of management and inspection of projects is directly related to the quality, or level, of the work done. If GSA or the professional services contractor staff the project for acceptable management and insuection, there should be little difference in cost. The agency and the contractor would pay ap- proximately the same rate for the services involved. Question 20. You refer to the percentages of GSA's inventory that is leased. Does percentage include the space under the purchase-contract program? What are the square footage figures for 1980? What is the estimated annual cost of that leased, plus the purchase-contract space, in 1980? Answer. The percentage does not include space under the purchase-contract~ program. Purchase-contract space is reported as government-owned. Our pro- jection of square footage under GSA control in 1980. assuming expiration of pur- chase-contract authority June 30 1975. and an annual average direct Constrtictiorm program of $300.0 million beginning in fiscal year 1971, is 160.1 million square feet of Government-owned space and 101.1 million square feet of leased space. The estimated annual cost of space leased and purchase-contract space will be $822.4 million in 1980 ($669.0 million-leased and $153.4 million-purchase- contract). All square foot figures are exclusive of outside parking. Question 21. Please explain what departmental programs will require the major increases in space that you have outlined in your statement. Answer. This question was answered in the testimony pages 15-16. Question 22. What is the rationale for proposing purchase contract construc- tion projects costing $161,000,000 in fiscal year 1976-in effect a mortgage not reflected in the budget-then proposing to return $55,000,000 in surplus' to the miscellaneous receipts of the Treasury? Answer. This question is answered in the testimony page 25. Question 23. I understand that a recent prospectus approved by this Commit- tee foi PEA won't house PEA after all. Would you please explain? Would you also provide for the record the details on tIme cost of the lease and the actual space obtained. Answer. On February 21, 1975, the Cosimir Pulaski Building located at- 20 Massachusetts Avenue was leased to house the Energy Research and Develop- ment Administration (ERDA). The rental rate is $5.99 ier square faot excinil- lug utilities for a firm term of 5 years for approximately 270.000 square feet of space. Approximately 100,000 square feet of this space n-ill be assigned initially PAGENO="0063" to the ERDA. with the balance of the space to be assigned to meet requirements on an interim basis of the SEC GAO or others. At such time as expansion of ERDA takes place, these activities will be relocated and the vacated space as- signed to ERDA. The prospectus for the acquisitioii of approximately 300,000 square feet of leased space contemplated that the space would be acquired and assigned to ~EA to effect a consolidation of that agency out of the New Post Office building and space leased at 2000 M Street, NW. Subsequent to the approval of the prospectus, Mr. ~Frank Zarb, the new head of the PEA, expressed a strong desire to remain in the New Post Office, and to have consolidation effected at the location. At about the same time the ERDA came into existence and established a require- ment for a consolidation location susceptible for expansion. In these circum- stances it was decided by the Administrator of General Services consistent with his authority to assign and reassign space, that the space at 20 Massachusetts Avenue would be assigned to ERDA, thus effecting the consolidation of ERDA and providing for its future growth, and that the PEA would be consolidated in the New Post Office-Old Labor Building Complex. The space vacated by PEA at 2000 M Street, NW., will be utilized to rehouse the Bureau of AT & F out of the New Post Office building. Question 24. 1 noticed in the newspaper report of staggering cost overruns including some GSA buildings. Would you please provide us with figures on the final construction cost of those buildings among the 63 that were in the 19~'2 backlog and how that compared with the estimated cost in the prospectus. Answer. This question is answered at page 12. Qeestion 15. 1 understand that your agency has been asked to participate in the Jobs Opportunities Program-title X of the Public Works and Economic Develop- meat Act. Could you outline any proposal you may have submitted? Answer. Attached is a copy of our submission to the Secretary of Commerce for this program. [Letter follows:] Februarm~ 10, 1975. Hon. FREDERICK B. DENT, ,S~ecretary of Commerce, Wasiiington, D.C. DEAR MR. SECRETARY: Pursuant to your request of January 21, 1975. we have conducted a survey of each of our programs for potential job creating oppor- tunities during calendar year 1975, under the provisions of the Emergency Job amid IJimemployment Assistance Act. As a result of this survey, we have identified the programs of this agency which could effectively utilize unemployed persons. Accordingly, the attached outlines our proposals in the form prescribetL thenumber of P001)10 that could be eni~ ployed, and the expenditures required for wages and related costs. Since we have already utilized our programs to the mnaximnum extent to create temporary employment within our existing resources. these proposals would require financ- ing under the appropriation provided to your department for this purpose. In summary, our proposals provide for hiring 6,719 people, resulting in ex- penditures of $117970000. Of this total, it is 1)laIllied that 5,036 people would be hired through contractual arrangements for calendar year 1975, and 1,259 wouEd be hired by the agency as temporary employees to perform work for our Public Buildings Service programs, involving maintenance repairs to buildings operating equipnient, repairs to Federally-owned buildings, and cleaning of GSA operated buildings, requiring expenditures of $115,400,000. TIme remaining 424 would be hired as temporary employees to work in our Federal Supply Service warehouses and interagency motor pools, and the records centers of our National Archives and Records Service, requiring expendit~ires of ~2.570.0d0. It is assumed that temporary employees hired under this type of program would be exempt from agency employment ceilings, similar to the youth oppor- tunity programs. We appreciate the opportunity to be of assistance in this very worthwhile program. Sincerely, ARTHUR P. SAMPSON, Administrator. [Enclosure.] PAGENO="0064" 58 1. Name of program-Repair and alteration Program. * 2. Brief description of project.-The Repair and Alteration project includes painting both the interior and exterior of Federally owned buildings: exterior cleaning, painting and water proofing of these buildings and caulking and weather stripping of windows where required. * There are a significant number of Federal buildings throughout the Fnited States that badly need this type of repair. GSA recommends that this program be accelerated in order to prevent further deterioration and damage to buildings. This program would be distributed throughout the continental Inited States, and portions of the program could be activated in any area that had a high rate of unemployment. 3. Breakdown of money-The program represents a possible total annual ex- penditure of $69 million. The distribution of these funds would be: jI.il1ion.~ Wages 841 Supplies and materials, including construction materials 28 Total (39 4. Estimated man-years of employment-It is estimated that 2.i45 craftsmen would be working for 12 months. It is estimated that anproximately 80% of this rogram would be accomplished by contract. w-ith the balance performed by force account employees. 5. Average duration of pro ject.-It is estimated that this project would run for a 12 month period. * G. Estimated starting date-It is estimated that the project would start be- tween 30 and 60 days after availability of funds. 7;Estimatcd completion date.-Within 12 months of start of project. 1. Name of program-Mechanical operation and maintenance. 2. Brief description of pro ject.-Maintenance repairs to building operating equipment represent a substantial continuing workload in the Public Buildings Service. The work is normally identified when regularly scheduled preventative maintenance is performed on the equipment. but the work is accomplished only on priority projects within our present resources. Performing these maintenance repairs on an accelerated basis would result in significantly better utilization of our energy resources. GSA recommends that the following types of maintenance repair services he accomplished in Federal facilities to stimulate job opportunities in areas which are suffering from unusually high levels of unemployment: Replace defective valves in equipment. *I~epair amid clean air-conditioning cooling towers. Clean coils in air handlers as well as other parts of ventilation systems. Replace broken insulation on pipes and insulate uninsulated areas. * Repair or replace damaged floor coverings. * * Repair or replace damaged concrete surfaces. This program would be distributed throughout the continental ITnited States: therefore, portions of the program would be activated in any area that had a high rate of unemployment. *3 Breakdown of money-Accelerating this program would generate on an annuttl basis an additional expenditure of approxiamately $21 million. This breaks down as follows: * Wages $14. 700. 000 Supplies and materials including replacement parts 6, 300, 000 * Total 21. 000. 000 4. Estimated man-years of employment-This project is estimated at 1.450 craftsmen working for 12 months. It is estimated that approximately 80% of this program would he accomplished by contract with the balance performed by force account employees. 5. Average duration of project-It is estimated that this project would run for a 12 month period. 6. Estimated startup date-It is estimated that the project would start between flO and 00 days after availability of funds. PAGENO="0065" 39 7. Estimated completion date.-It is estimated that this project would be com- pleted within 12 months of the starting date. 1. Name of progrctm.-I5pgrade the level of cleaning in GSA operated buildings. 2. Brief description of project.-The present level of cleaning provided in GSA operated public buildings does not permit the accomplishment of certain cleaning services, except on an exceptional basis. The accomplishment of cleaning services, such as those listed below should be performed on a periodic basis, and thus would serve to improve the working environment of the affected Federal facilities. GSA recommends that the following types of periodic cleaning ~ervices be ac- coniplished in order to stimulate job opportunities in areas which. are suffering from unusually high levels of unemployment: a. Window washing. b. Light fixture cleaning. c. High cleaning of interior areas (over 6 feet). d. Floor scrubbing and waxing. e. Venetian blind washing. f. Furniture cleaning. g. Wall scrubbing. h. Glass cleaning (interior, doors, etc.). i. Exterior grounds and lawn maintenance and improvements. This program would be distributed throughout the continental United States. Therefore, time program could be activated in any area that had a high rate of unem ploymnent. 3. Breakdown of money.- Amount for wages (approximately), $22,800,000. Amount for supplies and materials, $2,540,000. 4. Estimated man-months of employment-It is estimated that 2,300 laborers would be working for 12 months on this project. It is estimated that approxi- mately 80% of this program would be accomplished by contract with the balance performed by force-account employees. 5. Average duration of project-It is estimated that the project would run for a 12 month period. 6. Estimated starting date-It is estimated that the project would start be- tween 30 and 60 days after availability of funds. 7. Estimated completion date-It is estimated the project would run for a 12 month period. QUEsTION FRoM SENATOR MCCLURE Question. We had problems this year about the levels of the SLUC charges. One of time most glaring problems occurred in Pocatello, Idaho. Would you tell us how you have overcome that problem this year? Answer. In answering Senator McClure in April 1014, we had anticipated a rural reduction authorization from 0MB. Therefore, we informed him that the original rates would be reduced by 25% in that area. The rates in the initial July estimate billing were: office space was $0.08 sq. ft.; storage space was $1.42 a Sq. ft.: and special space was $6.71 a sq. ft. In addition, after a comprehensive review of space market in Pocatello, we concluded that the SLUC for that space was out of line w-ith the commercial rates. We reviewed the quality rating of the building and took action to reduce it froni a rating of 08 to 56. This resulted in a reduction of rural rental rates for the office space from $4.56 to $4.02 a sq. ft.; storage space from $1.42 to .08, and special space from $3.36 to $2.04 a sq. ft. Furthermore, the Postal Service in the interim, relinquished space. In the July budget estimate they were assigned a total of 10,647 sq. ft. of space; in time first quarter arid rural correction billings, they were billed for a total 0,478 sq. ft. of space: and in the second quarters billing, they were billed for a total 6,330 sq. ft. of space. With the rural reduction, the quality rating reduction, and the relinquishment of space, the Postal Service annual bill w-as reduced from $56,268 (July estimate) to $23,204 (Rural Correction) to $16,732 (Second Quarter's Billing). .50-194-75---5 PAGENO="0066" 60 Senator MORGAN. With regard tOthe hearing that was started yes- terday, on the Social Security Buildings, and in light of the Senate schedule~ for the clay, I just don't see how we can continue with that hearing today. I have discussed this w ith Senator Randolph I think v-c would do better by postponing it until we can at least set a day when we can reasonably foresee enough time to go through it thoroughly. We will now conclude this hearing. Thank you very much. [Whereupon, at 12 nOon, the committee recessed, to reconvene Thurs- day, February 27, 1975.] PAGENO="0067" ) BUDGET REVIEW FEDERAL HIGHWAY ADMINIS FRATION THURSDAY, FEBRUARY 27, 1975 TJ.S. SENATE, Co~r~nT1TE ON PUBLIC WORKS, Washington, DXI. The committee met at 10 :05 a.m., pursuant to call, in roQrn 4200, Dirk~eii~ Senate Office Building, Hon. Jennings Randolph (chairman of the cOmmittee) presiding. Present: Senators Randolph, Montoya, Bentsen, Hart, Buckley, Stafford, and Domenici. OPENING STATEMENT OP HON. EENNINGS RANDOLPH, ThS. SENATOR PROM THE STATE OP WEST VIRGINIA The C1~IAmnMAN. Good morning to all of you, our witnesses and our guests. Our hearing today has a dual purpose. It was originally scheduled to revi~w~ the budget request of the Federal Highway Administration for fisčal year 1976. It has subsequently been broadened to include the issues addressed in Senate Rësólution 6 which I introduced on February 7 with the cosponsorship of Senator Muskie and other Mem- bers of the Senate. It would be difficult, in fact, to discuss planned spending for high- ways without taking into consideration the impoundment of highway obligational authority. Recent judicial action plus the President's re- lease of $2 billion in impounded highway money make this a very timely topic for review. As our country's oldest grant-in-aid program, the Federal-aid high- way program has more than a half-century of experience in meeting transpdftation needs. During that time it has reached a level of sophistication and diversity that enables it to respond not only to changing attitudes about transportation, but also to the new economic and energy realities that are on the minds of all of us. This is an important year for the Federal-aid highway program. The Congress is initiating its new budgeting procedures, and this hear- ing is a part of that effort for us to look at Federal expenditures in a total entity rather than by individual programs. But 1975 also is a year in which there will be major legislation on the form, and future of the hi4hway program. The appropriate committees in both the Senate and House of Representatives also will consider how highway activi- (61) PAGENO="0068" 62 ties will be financed in the future. So it is perhaps fitting that we ibegin our formal examination of Federal highway activities this year with an examination of the budget for the coming fiscal year. I do not want to limit our inquiries to the single year, however, for an ongoing program such as this one must be carried out on a long- range basis. What is done this year or next influences roaclbuilchng in the future. For the short term, however. I am concerned with the effect of the Presidential release of $2 billion on the program. TJncler existing con- clitions of recession, I believe the highway program h~is great potential for stiimilating emplo ment.~ The extent to which this is accomplished depends on the ability of the construction industry and the States to utilize additional funding. For nearl 20 years the Interstate System has been our principal highway concern. Other highway needs have accumulated during that time,, and these must be addressed. In this context, we will want to exp1oi~e with the witness today the effect of the agency's spending plans on interstate and other highway construction. Inflation continues to strongly influence our roadbuilding ability. Highwa construction costs rose by 3S percent. in the last year. mean- ing that we receive less and less road. for every dollar. Rising costs, therefore, must receive our attention in establishing spending levels. Governor Tiemann, I look forward to discussing these and other issues with ~you this morning. This committee has enjoyed a good working re]ationship with the Fedleral Highway Administration. I know that our new responsibility to review your spending' requests will add a new dimension to our knowledge audi our ability: to work together on a program that effects the life and wellbeing of all Americans. , NQw. it is my desire to accommodate the Senator from New Mexico. because. Senator Montoya has a commitment that he must keep at the same. time we are meeting here today. OPE1'TING STATEMENT OP HON. JOSEPH M. MONTOYA, TLS. SENATOR PROM THE STATE OP NEW MEXICO Sen'ttoi ~Jcr~ TOl ~ Th'uik ~ on, Mi Ch'uim'in I appieciate this courtesy~ and I want to say that I congratulate you .for the:ieadership which you have demonstrated in envokin~' this hearing for the pur- poses which you indicatedi. andi in the spirit of brevity. I would like to ask the Governor just one question. But I want to say by way of pief'tce th'~t n the St'mte of New Mexico the Executn e Diiectoi of time State Hi hway Department is hopeful that the New Mexico legisla- tuie c'tn `wpoition funds to complete tw 0 poi~ions of Inteist'iie 10 But there is no final action at this time. Interstate 10 has been a contention for about 15 or 20 years. Through ~ our pi edecessoi who visited w ith me and `~ttendedi `~ hearing in New Mexico w e w ere able to resolve many of the disputes that wei e theii piev'tlent `md now we have had the green light to do something `ibout Inteist'ite 10 from Tuc~mc'iui to Texas Now oui Executive Directoi feels th'it it is quite doubtful we can nike ~fl~ective ise of all. apportiOned `funds. New Mexico could lose PAGENO="0069" 63 many millions in released trust funds unless we find a way to offer relief. I want to ask this question: What problems do you foresee, Gov- ernor, if any, from legislation which I intended to introduce which would permit States to borrow against future apportionments? STATEMENT OP HON. NORBERT T. TIEMANN, ADMINISTRATOR, FEDERAL HIGHWAY ADMINISTRATION, ACCOMPANIED BY THEO- DORE C. LUTZ, DEPUTY UNDER SECRETARY OP TRANSPORTA- TION; LES LAMM, EXECUTIVE DIRECTOR; JOSEPH R. COUPAL, DEPUTY FEDERAL HIGHWAY ADMINISTRATOR AND PROFES- SIONAL STAFF MEMBERS, FWHA Mr. TIEMANN. Senator Montoya, we visualize a number of problems that would arise from the legislation that would relieve the States of the matching problem that they allege they have. Senator MONTOYA. This was done as you recall, in the 1958 amendments. Mr. TIEMANN. Yes; I am familiar with the 1958 amendments, the so-called Gore amendment. You recall the amount of $400 million was authorized as a special release to help the economy, and that the specific relief to the States to aid in matching the authorization was very nar- rowly tied to an amount of $115 million. That amount of relief as I said, was about $115 million, and most of it was utilized by the States and subsequently paid back. It was paid back by virtue of the Government retaining part of the appor- tioned funds over a 2-year period, but it was all paid back. We see any number of inequities that would result from legislation of this type, whether it was something like the 1958 language, or any- thing like that. First of all, we don't think the problem is as great as~ we were led to believe last week when the National Governors' Conference was in town. As we went to the States to make the determination as to how much money they could obligate prior to the time the President released the money, we were informed by the States that, "Yes, we can obligate by the end of this fiscal year the whole $2 billion, and we will have no problems." Subsequently we have found eight States with problems, not neces- sarily matching problems. One State does not have matching problems, but it does have environmental problems that are holding up highway projects. We think the inequities would be felt by those States, like this par- ticular State, which happens to be New Jersey, which has no matching problem. but has environmental problems. If you did give them funds, they still couldn't use the money, because it is held up for another reason. Senator MOXTOTA. Why would the committee of the Governors come into this committee and tell us that the Governors unanimously sug- gested that this legislation would bevery much in order? : Mr. TIEMANN. I met with that same committee, Senator, and they told me the same thing. Yet when I went around to the Governors on PAGENO="0070" 64 an individual basis and asked, "Do you have matching problems?", most of them assured me they did not have matching problems. Now having been on that side of the aisle and having to vote for i~egulations like this one, I can understand why they might say "Yes, we do have matching problems," when they might not be in existence. Senator MONTOYA. If they didn't have matching fund problems, would they be eligible under this legislation? Mr. TIEMANN. I suppose you discount equity if you declare a St-ate not eligible, even if they are solving their own problems. * Senator MONTOYA. In view of the fact that the Government would not lose any of its money, but would recoup it against subsequent alloca- tions, what inequity exists as far as the Government is concerned? Mr. TIEMANN. Well, I guess I will go back to the Chairman of the Transportation Subcommittee's economic base for making the request of not requiring matching funds. That was that most States were not able to go to deficit financing, so that they would be precluded from borrowing to make up the matching funds, but because the Federal Government could in -fact engage in deficit financing it could easily afford to give the States the money. That is not my version of economics. Senator MONTOYA. Mr. Chairman, that is the last question I had in mind at this time, and I want to thank the Chairman of the subcom- mittee for allowing me to ask these questions, and I want to thank you, Governor, for answering them. FAt this point Senator Bentsen assumes the Chair.] Senator BENTSEN [presiding]. Governor, are you prepared to give a prepared statement? Mr. TIEMAXX. Yes. Ma-v I introduce the members of the staff at the table with me today? Mr. Ted Lutz, Deputy Under Secretary for Budget and Program Review, Mr. Joe CoupaL Deputy Administrator, and Mr. Les Lamm who is the Executive Director of the Federal Highway. Administration. Senator STAFPORD. Mr. Chairman. before the Governor begins~ I have a small opening statement, and in the interests of time I. would ask unanimous consent that it be made part of the record. Senator BENTSEN. That will be fine. Senator Stafford, and I will introduc~ mine on the same basis and also a statement from Senator Birch Bayh. [Senator .Bentsen's, Senator Stafford's, and Senator Bayh'~ state- ments follow:] OPENING STATEMENT OF Hox. LLOYD BENTSEN, U.S. SENATOR FROM THE STATE OF TEXAS The Public Works Committee will conduct a hearing this morning to fulfill its obligations under the Congressional Budget- and Impoundment Control Act of 1974. Under this legislation, the Senate Budget Committee must report the-first con- current resolution on the budget by April 15 of each year. For the Budget Com- mittee to complete that function, the standing committees and joint committees must submit reports on estimates of budget outlays and new budget authority for each functional category in which the committee has legislative jurisdiction. We must submit these reports by March 15. To meet the March 15 deadline, we are soliciting the views of the agencies over which we have jurisdiction concerning their anticipated levels of funding for proposed or continuing programs. - PAGENO="0071" 65 Today, we are pleased to have with us the Undersecretary of Transportation, Mr. Ted Lutz and Governor Norbert Tiemann, Administrator of the Federal Highway Administration. Gentlemen, this Subcommittee has been concerned, as you know, about the billions of dollars impounded in highway funds at a time of high unemployment in this country. We are pleased that the President ordered the release .of the ~2 billion, but we still have a number of questions about funds remaining impounded, about budget deferrals and rescissions and about the scope of the Federal aid highway program in the next several years, particularly at a time of economic uncertainty. We welcome you here and look forward to your testimony. OPENING STATEMENT OF HON. ROBERT T. STAFFORD, U.S. SENATOR FROM TilE STATE OF VERMONT Governor Tiemann, it is a pleasure to welcome you to the second budget hear- ing ever to be held by the Senate Committee on Public Works. As you note in your written testimony, it is the first appearance by FHWA in such a forum and so is a joint exploratory venture. This series of hearings-during which we will examine agencies under the jurisdiction of this Committee-is in the nature of a "shakedown cruise." We hope to learn from them specific information which will help us in making our authorization and outlay recommendations to the Budget Committee in March. We also hope to learn for future reference what kinds of questions we need to ask in order to get those answers which will be most useful to us. We will be seeking a longer range view of programs than the annual oversight conducted by the Appropriations Committee. At the same time we will be focusing on needs in specific program areas and budget categories. We will not attempt to structure comprehensive national economic overview which is the primary responsibility of the Budget Committee. Finding the means to make our most significant contribution to the budget process will not be easy. We hope the hearing today and the others in this series will be especially educational. We will be relying on your agency's expertise, both today, throughout this year,. and into the future, to assist us in a difficult task. If past experience is any guide, I am sure you will not disappoint us. STATEMENT OF HON. BIRCH BAYH, U.S. SENATOR FROM THE STATE OF INDIANA Mr. Chairman, I wish to thank you and the members of the Subcommittee for giving me the opportunity to present this testimony. As a former member of the Public Works Committee, it has been my pleasure to witness the fine work of this Committee over a period of many years. And it is as a former Chairman. of the Public Works Committee's Subcommittee on Roads and current Chairman of the Transportation Subcommittee of the Appropriations Committee that I address you today to recommend action to increase federal aid to the states for highways. Mr Chairman, every member of this Committee is acutely aware of the economic hardships which have befallen our nation. Last month we had over 71/~ million citizens who could not find work, and that number is likely to increase in the months to come. We have heard that in January the rate of inflation subsided substantially, but one can hardly term this good news when the cause of the low-er rate was our deepening recession. In recent months Congress has taken the lead in combatting our economic problems and providing aid to those who have been the victims of recession. Our enactment of legislation to extend unemployment compensation and the public service employment bilL including the job opportunities program, are but two examples. But there is much more to be done. Mr. Chairman, and an important step we can take now is tO increase the federal aid highway funds available to the states. As you know until a few weeks ago the President had impounded $11 billion in highway funds. Mr. Chairman, when 22 percent of our construction work force is unemployed, and everyone in government is agreed upon the need to stimulate the economy, it makes little sense to withhold billions of dollars which could be PAGENO="0072" 66 put to use in providing highway construction jobs. I believe it is imperative that we act to free funds for such use, and I believe that time is of the essence. Earlier this month, President Ford announced that he would release $2 billion of the impounded highway funds. This action was a step in the right direction. but many state officials maintain that much more money is needed and can be utilized. Further. there are many states wthich will find it difficult if not impos- sible to meet matching requirements and take advantage of the funds which have been released due to declining gasoline tax revenues and the recession. Your investigation as well as that of my ow-n Transportation Subcommittee will provide many of the hard facts regarding exactly how- much money can be utilized by the states in relatively quick start projects and exactly which states are ready to begin work. We can now, however, commit ourselves to utilization of federal highway funds to the maxiniuni extent possible and to helping the states meet matching requirements. The Administration has estimated that the release of 82 billion in federal aid highway funds will provide about 150,000 jobs in construction and related in- dustries. This estimate will be quite hollow-, however, if tile bulk of the funds are not used by the states because they are unable to come up with the matching requirements. Unfortunately, the Office of Management and Budget has announced that it opposes any further aid to the states to meet their matching problems. Thus, as has happened so often during the last few years, it is now- up to Congress to provide the leadership necessary to take full advantage of our federal highway program. Mr. Chairman, I do not believe we can allow a large portion of those 150,000 jobs promised by the President, or additional jobs provided by the further release of impounded funds, to be lost due to a lack of matching money. It is up to us to take prompt and decisive action. The times require no less. The jobs provided through the highway program will not be niakework-. They will not be just raking or sweeping. Instead, those jobs will result in eitension of our highway system and improved road safety. Tile program will build needed railroad crossings and bridges. The benefits will be real and lasting. In particular, I recommend that the federal government irovide no interest loans to the states to meet 100% of their short-term matching needs. The loans could be made from unused highway funds and then be repaid by the states out of future apportionments. This approach would avoid any loss to the federal government, other than interest, and would insure that the highway funds would be put to quick use now when they are needed. It would also provide a simple mechanism for repayment of the loans, which would involve no out-of-pocket expense to the states. In my opinion it is the least costly and least inflationary approach available. In order to implement this proposal, it will be, of course, necessary to enact legislation, and I urge the members of this Committee to give early considera- tion to my recommendation. Further, Congressional action will be required to free impounded funds for loans to the states as well as to meet normal apportionments. It is quite clear, Mr. Chairman, that the people of this nation expect their elected officials to take all possible steps to halt the slide of our economy and spur the country forward again. It is also quite clear that while not a panacea for our economic ills, the federal aid highway program is a weapon which can be helpful in our battle against recession. I hope that this committee will take the action to insure that this weapon is used to maximum benefit. I again thank you for providing me this opportunity to express my views. I wish the Committee the very best in its deliberations, and I pledge my full cooperation in making the highway program a viable and important anti-reces- sionary tool. Senator BEXTSrN. Do von have a statement~ Mr. Domenici? Senator DOMEXTCT. No statement. Mr. Tir~r&xx. This hearinr~ today is certainly somewhat of an ins- tone event because it is our first appearance before the Public IVorks Committee tinder terms of the new "Congressional Budget and Tm- ponndrnent Control Act of 1974." My colleagues and I are nleased to loin von in this endeavor to im- plement the procedures of that act and to aid the Congress in any way we can which will help achieve the desired results. PAGENO="0073" 67 I would like to review three broad areas in which financing arrange- ments for the various highway programs have an impact upon both the progress of those programs and the national economy in general. These broad areas are: 1. The Budget Estimate and outlook for fiscal year 1976. 2. The relative influence of highway construction programs as a generator of employment, and 3. The effect of the deferral message submitted last September under title X of the new act on highway programs. First, I will address the fiscal year 1976 budget estimate which was transmitted to Congress by the President on February 3, 1975. For fiscal year 1976, the estimate contemplates total obligations of $5.4 billion for all programs administered by the Federal Highway Administration. This includes about 14 discrete appropriation ac- counts, the largest of which by far is "Federal-aid Highways" at $5.2 billion. By way of explanation, these various appropriation accounts are in fact our requests for financial resources with which to conduct the several programs during fiscal year 1976. The estimates are based upon and are within the legislative authori- zations previously made available by Congress and with which this committee is most familiar. The fiscal ear 1976 budget also anticipates outlays for these pro- grams totaling $5 billion. In general, out budget requests take on two distinct and separate characteristics: First are those accounts in which we are requesting the appropria- tion of cash to liquidate obligations incurred under the contract au- thority made available for several of our programs. Second are those noncontract authority accounts in which we are requesting budget authority and in fact ca~mot incur any obligations until the appropriation is enacted. Our largest single account, "Federal-aid Highway", is of the con- tractor authority and liquidating cash type. This is the account in which the bulk of our deferrals have occurred which I will discuss later. The development of budget estimates within the executive branch usually starts about 15 months before the particular year at issue. They must be completed and submitted to Congress in January pre- ceding that year. Much of the work on the fiscal year 1976 budget was done during late fall aud early winter and reflects efforts to curb inflation which was already at an unacceptable rate. Concurrently, however, recession and unemployment have also reached unacceptable levels, and it will be necessary to consider alternative program levels that are designed to balance Federal spending policies as they may impact upon each of the two problems. It was in fact, consideration of this balanced approach toward solution of our economic problems which caused the President to release $2 billion additional obligating authority to the States for highway construction. PAGENO="0074" 68 At this time, however, it is not possible to speculate whether and to what extent our present budget estimate for fiscal year 1976 may be adjusted in the future. Much will depend. of course. on the eco- nomic impact of the recent release. I should also emphasize that the fiscal year 1976 budget does not reflect the financial implications of this release. Next I will turn to the. problem of unemployment and the impact which highway construction programs can have on it. Over the past 20 years the highway construction industry has experienced signifi- cant productivity gains with the introduction of massive earth mov- ing, grading. and paving equipment. New methods and materials have also helped increase productivity. More recently it has also expe- rienceci inflation along with other sectors of the economy. These two factors have tended to reduce the amount of labor gen- erated per dollar of Federal investment in highways over the years. At the present time we estimate that each billion dollars of expendi- tures for highway construction will generate about 55,000 job oppor- tunities: 26,000 onsite and 29,000 offsite. In addition, we estimate that as many as 71.000 additional ancillary job opportunities may be induced for a total of 126.000. The budget estimate before you Proposes $5.2 billion as the Federal investment in highways. We believe that this infusion of Federal spending will create job opportunities as follows: Direct (onsite) employment 130. 000 Indirect (offsite) employment 146. 000 Induced employment 366, 000 Total job opportunities 642, 000 Our calculations show that the President's release of $2 billion of additional released obligation authority above the level proposed for fiscal year 1975 of $4.6 billion, will generate, among other benefits, at least 107,000 additional jobs. About half of these jobs would be on construction sites and the other half would be in industries supplying equipment and materials needed for the projects. We estimate that this direct generation of employment will induce, as many as 141.000 more job opportunIties above the. expected direct employment for a total of approximately 250,000. It is clear that these additional Federal highway investments will achieve two desirable results: 1. Employment will have been generated and utilized. 2. A useful and needed long-term capital investment, will have been made. Finally, I will direct my remarks to the issue of impoundment. As of September 20, 1974, the President submitted a deferral messa.ge on highway programs-among many others. In our case at that time, the execlTtJ ye branch had released obligating authority which left about $10.7 billion of authorized funds impounded. In the meanwhile. Congress enacted the Highway Amendments of 1974 which increased outstanding authorizations by some $350 million. Thus, the Present impounded. authority approximates $11.1 billion. This, however. has been reduced by $2 billion to $9.1 billion as a result of the most recent release. PAGENO="0075" 69 When fiscal year 1916 commences next July 1, this will further be reduced by $5.2 billion to a level of $3.9 billion. With the release of $1.3 billion for the transition period to the new fiscal year, it will be reduced even further to a level of $2.6 billion. This completes my statement. My colleagues and myself are at your disposal in helping in any way that we can. Senator BENTSEN. Thank you very much Governor. I well under- stand the Governors' position in preferring not to meet with match- ing funds. I know that some of the States are having difficulties. I also look at the situation, the projected $52 billion deficit in the national budget, and I have some concern over that. I think this problem of stimulating the economy is the obligation of all levels of government, and that they all have to participate in it. I know that it has been kind of interesting at times, the things that we have done on revenue sharing to assist some of these States and Governors in that regard. Then we hear some of the speeches that if Congress could only manage its affairs and its budget as well as we do in the States, it sticks in my throat just a little bit. I think it is a burden for all of us to share. I have supported public service jobs, and I think it is an emergency measure that we have to do, but I really much prefer lasting investments in the future of this country, be it sewage plants to clean up the water, or be it permanent investment in the safety of our highways. So when we talk about the President releasing $2 billion, and I am very pleased to see that, if he would release the other $2.6 billion, we are talking about another 300,000 jobs. With unemployment at 8.2 and 7― million unernployed~ it seems a pretty persuasive argument that we stimulate the economy in that way. If all of those funds were released, do you think that they would be absorbed by the States? Mr. TIEMANN. I would guess, Senator, with respect to the timing of the release, they could. We feel if the additional impounded funds of $2.6 billion were released in fiscal 1976, they could be obligated by the States. Senator BENTSEN. Let me ask you a specific program question, and this involves something in my own State. We have demonstration proj - cots, as in Brownsville, Tex. We have received already some $522,000 in Federal funds. The people down there have concluded an agreement with the Mex- ican Government to cooperate in eliminating a number of dangerous rail crossings. You sent us a report in January indicating that the Departn'ient recommends no money for any of these demonstration programs. Where are those people supposed to get the money to finish those programs? Mr. TIEMANN. Well, I think two points could be made on that, Mr. Chairman. One, we don't argue with the need for projects of that type. At the time that you indicated that the report was made, we were looking at the program on the basis of the merits of each of the par- ticular demonstration projects, and I guess at some point we-I have PAGENO="0076" 70 to say in the interests of fighting inflation-somewhere we will have to start cutting. Senator BENTSEN. That is a pretty unique one down there, Governor. We are having problems with Mexico in our relations and they are concerned that at times we don't fulfill our commitments. 1-lere is one where we started the projects, they are cooperating, and then it involves a cooperative effort of the two Governments. ~\Ve put $522,000 of taxpayers' money in it, and then we back off from it. Mr. TIEMAXN. Some of my colleagues may want to correct me if I am wrong on this thing, but I understand fmicls were advanced for preliminary engineering for those projects. Senator BENTSEN. That is still money spent. Mr. LUTZ. It is still money spent, sir. As the Governor indicated, in looking over the budget, this gets back again to where do you draw the line when you have massive deficits confronting you. We felt in the Department that there is a unique feature about the Brownsville proj- ect and we have tried to give them special assistaiice. As you say, this involves international relationships that do concern us. Again, where do you draw the line effectively? Senator BEXTSEX. I would say about 20 miles north of the border. Mr~ LUTZ. There is another oiie in Texas as I recall, that may be affected of the 12, but again it comes to an issue of at what point was it fair to the rest of the country to single out 12 or so special projects? WTe are recommending only Preliminary eiigmeering funds, and you and your colleagues will have a chance to act on that under the same act we are discussing today, the Budget Control Act. The Congress may reject a proposal to free up money for Browns- ville as well as the other 11 projects involved. Senator BEXTSEN. I have a deep interest in it. and I think that trying to work out our relations with President Echeverria of Mexico, just as with the salinity control on the Colorado River, this is important. We. shouldn't let this one fail through the cracks and not deliver on our commitments. Now let me ask you a question oil thu interstate. In 1972. as I recall, your estimated cost for the interstate was around $76 billion. Now I understand those estimates have been-have gone to $90 billion. Suppose we say the interstate is 85 percent com- plete. That is not really right, because we took in a lot of substandard roads, and :jf you bring those up to standard, you are talking about substantially more. - We ~Uighmt say we have at least $30 billion to go. Ton are proposing $31/4 billion for fiscal 1977 and $3.7 billion for after that. How long is it going to take to complete the interstate at those levels with continued escalation of inflation? Mr. TIEMANN. If we have authorizations at about the $4 billion level, we could finish the interstate between 1982 amid 1990. Senator BENTSEN. Do you think at least at these levels you are going to do that., at the $4 billion level? Mr. TIEMANN. Yes. Senator BEXTSEN. What kmdl of inflation factor didl von use? - Mr. TJEMANX. 7 percent.. . - PAGENO="0077" 71 Senator BENTSEN.. I brought one of those pocket calculators with me, but I am not sure you will come out on that. Mr. *TIEMAXN. I am sorry. My colleagues remind me that :a zero inflation factor will result in a 1982 completion date and a 7 percent inflation factor will result in a 1990 date. Senator BENTSEN. Oh. I have some question about the anthnietic~ there.' Let me. ask you about highway projects. Some of them seem to be more labor intensive than others. Would we be helping and trying to help unemployment if we eased the restrictions on some .of the categories, some of the programs, so that there would be an, easier flow of funds' by the States in their administration from one. category to the other if some of these c.ategories were more labor intensive? Would that be a plus? Would that be a.help? Mr. TIEMAN,N. Yes, I think without question, Mr. Chairman-that is exactly what we did with. the $2 billion that was recently released. We took the, restrictions off the categories, and the States could use those funds in whatever .projects they wanted to obligate them,. with a couple., of exceptions. One, they could not use more than 20 percent of those funds for acquisition of right-of-way. We. put a time limit from the time we gave project approval until the contract was let or work was .begun, aiid that time limit was 45 clays. . Other thaii those two restrictions, tIme States could do pretty much as they pleased. We are encouraging them, of course, to let, projects that are labor intensive. Senator BENTSEN. You are? Mr. TIEMANN. Yes, sir. Senator BENTSEN. Are you giving indications of what is more labor intensive? Do you have studies to show that? Mr., TIEMANN. Projects such as safety projects are those: that are labor intensive. Those are the ones that could be obligated. When you get .into major projects, like interstate projects, they can't obli- gate the funds between now and the end of the fiscal year. The projects are too large. The short range really lends itself to labor intensive projects. Senator BENTSEN. Thank you. Senator Stafford? Senator STAFFORD. Thank you, Mr. Chairman. Governor, I am a little puzzled by the last page of your statement when you referred to fiscal year 1976, which commences ne.xt July 1, and you ,said this will further be. reduced by $5.1 billion, and you are referring, to the impounded funds. Do you mean that you will be drawing down the funds and not looking for any new authorizations of obligated funds in 1976? Mr. L1IJTz. Sir, if I may answer that, the presently deferred funds of $9.1 billion include the 1976 authorizations. In other words, as you know, we get the 1976 authorizations in advance of the.beginning of the fiscal. year, a procedure we propose to change in our.new High- way Act which you will be considering. . . . In effect, the 1976 authorizations are included in the $9.1 billion so that. wh~ei~ we subtract the 1976 budget estimate of $5.2 billion that in effect means that the real 1976, at the end of 1976, you would have a real impoundment of $3.9 billion. PAGENO="0078" 72 Senator STAFFORD. Thank you for clarifying that for me. Governor, you answered Senator Bentsen's question about the re- lease of the remaining $2.6 billion in fiscal 1976. IDici you mean the States could obligate the $2.6 billion in addition to the full level of authorized funds for fiscal 1976~ about $6.3 billion? Can the States carry on a ~9.3 billion highway program in 1976? Mr. TIE~rAxx. The States have indicated that they could obligate about $7.2 billion in 1976. Senator STAFFORD. That is in total? Mr. TIEMANX. In total, yes, sir. Senator STAFFORD. I could go back to the 1974 Highway Needs Re- port. It states that the conclusion reached from this analysis of high- way needs is at a current combined funding level for Federal, StateS and local governments, is sufficient in constant dollars to maintain the level of.performance. of this Nation's highway plan. I think that level was about $8 billion. Can you translate this state- ment into what investment level would be required, taking into con- sideration varying rates of inflation, in order currently, to maintain levels of Performance? I might go on and add to that the Highway Needs Report compares with the .1-Iighway Users Federation estimate that instead of $8 bil- lion annually. $17 billion annually is the required investment tO main- tain the status quo of the Nation's highway plan. Mr. COUPAL. We have beeii estimating. Senator. to maintain the current service level that it would require about $8 billion more a year than the total now being spent. That includes maintenance as well as construction, and administrative overhead. As nearly as we can calculate, about $8 billion more would be re- quired, assuming time continuation of the Preselit level of iiiflation. Senator STAFFORD. I guess your answer would be that $17 billion is an excessively high figure. That is the figure that the Highway Users Federation has proposed, and that $8 billion is the correct figure? Mr. COUPAL. I would assume that the $17 billion incindes meeting all needs, including the backlog needs, too. Of course, we are not pre- pared to say that $8 billion would take care of upgradling:the present system to what it ought to be. are talking about meetingthe accruing needs. Senator STAFFORD. Governor, could you or your associates comment on how ĢOøfl segments of the interstate are likely to need restructur- ing? Have you any short term, that is, in the next 2 to 4 years. do you have a~ short-term estimate of the cost of reconstruction that you be- lieve is necessary? Mr. TIEMAXX. We could develop those figures for the record, Sena- tor. In fact, many segments of the original interstate require recon- struction iight now, and some of those segments are-some are being rebuilt, b~~t really, our priority presently is to finish those gaps that piesenti~ e' ~st eshieclQll\ inteicitv gaps andi we will he addies~ing ourselves to that problem in the 1975 legislative proposal that will be on its way imp soon. Senator STAFFORD. When you talk about restructuring, are yOu talk- ing ~tbout iesui f'mcing, 01 iedesigning some of them ~ PAGENO="0079" 73 iI\ir. TIEMANN. Both. In the past 20 years there have been advances in design and construction tecimology. Senator STAFFORD. That would include access interchanges, where there aren't adequate acceleration laiies and deceleration lanes and things like that.? Mr.: TIEMANN. That is correct.. Mr. LAMM. To supplement the Governor's response, Senator, the 19 5 costs will break down the costs remaining to bring the entire Interstate System up to today's standards, and you will find there is a sizable increment in that cost relating to increments already open to traffic, to bring them up to an adequate level of performance. Senator STAFFORD. Governor, your needs report that I mentioned earlier specifically addresses noninterstate capital needs highlighting `uteu'd ann eollectoi highw"tys clip ible for inclucion Do your overall figures take into account safety hazards andbridge ieeonstruction and replacement of the Federal aid system?. Mr. fIEMANN. Of tlie Interstate System? Senator STAFFORD. Of the whole Federal aid system. Mr. TIEMAXN. Ves, it does. Senator STAFFORD. Could a statement with respect to what~you just said 1)0 placed in the record, so we won't unduly take up the time of the. committee? I would like a detailed statement. Mr. TIEMANN. We will furnish the statement.. [The information requested follows:] The 1975 Interstate Cost Estimate which is to be submitted to the Congress shortly indicates that the estimated total cost of the System, in Federal-aid and Sate matching funds, as of January 1, 1074. is $80.2 billion. rffii~ figure includes $32 275 billion oa~ed en 1073 pines toi ii~liininais eneineeiii ~ u~ht of is `es and construction work yet to be undertaken to complete the System. The estimated required Federal funds corresponding with the $89.2 billion total cost of the System amount to $79.52 billion. Of this amount $57220. billion has been apportioned to the States through fiscal year 1076 leaving a balance of $22.3 billion of Federal funds yet to he apportioned from 1077 and beyond. The required $22.3 billion authorization needs are based on 1973 piic~s without consideration of cost inflation. The ačtual needs for completing the System w~ould be dependent on future inflation and authorization levels. Included in the $32275 billion cost to complete is an approximate amount of $7.0 billion for upgrading sections which. are currently open to traffic. Minor improvements on these sections account for about $4.6 billion while major im- provements account for $3.3 billion. The minor improvement cost is greater than the major cost because a substantially greater number of miles require minor improvement. AlsO included in the $32275 cost figure is $1.6 billion for further work to be accomplished on segments currently under construction and $22.8 bil- lion foi the sections w hich stiil neod to be put un lei construction DETAILED STATEMENT ON HIGHWAY NEEDS The basic approach to the needs calculation involved an actual field inventory and appraisal within each State of a representative sample of its highways in each functional, classification. Two sets of standards are used in the. appraisal process. The first is a set of conditions which defines the physical and operating characteristics of a highway deemed satisfactory from an engineering perspective to serve' current traffic. Highway sections failing to meet these conditions at any time duringthe 20 years are considered in need of improvement. The second set of standards is the design standards to which any highway section not fulfilling the reference condition would be upgraded. The estimated costs to improve these sections according to certain design standards for the PAGENO="0080" 74 20-year perio.d following improvement were defined as highway needs. The main purpose of having uniform nationwide design standards and engineering refer- ence conditions was to facilitate a national assessment of needs on a uniform basis. A representative sample of road sections from the 1990 functional classification was selected in each State and existing condition data for each selected section of roadway were obtained either from existing records or field inventory. The full description of the functional class designation procedure is contained in the National Highway Functional Classification and Needs Study Manual (1970- 1990). Comparison of the inventoried conditions with the appropriate operating and physical condition standards was then made. If a shortfall from the reference standard existed, based on present conditions, the highw-ay section was placed in the `backlog" category of needs. If the section met the reference conditions, then traffic volume and pavement condition were forecasted into the future to see whether the section would fall short at some future time period. Future shortfalls were grouped into four time periods: 1 to 5 years. 0 to 10 years, 11 to 15 years, and 10 to 20 years. Six categories of shortfalls were identified: 1. Operating speed or volume-capacity ratio. 2. Lane width or roadway width. 3. Safe speed. 4. Pavement type and/or condition. 5. New location (no initial shortfall). 0. Structures only. The type of shortfall provides a key to the appropriate type of improvement to be made. For example, an operating speed shortfall would indicate additional capacity costs. In order to obtain this, widening might be scheduled as the type of improvement; and if necessary right-of-way could not be obtained, the road may have been shown as being rebuilt on new location. Similarly, if the only shortfall during the study period was in pavement condition, the type of im- provement would be resurfacing. Logic flow charts were provided to aid the States in determining the appropriate type of improvement based on indicated shortfalls and other key data. The charts merely served as guides and the in- structions discouraged the reporting of sections not realistically anticipated to he constructed due to environmental or social effects, excessive rights-of-way re- quired, or political unacceptability. The following represent the improvement categories analyzed: new location, reconstruction, isolated reconstruction (less than full section length), widening, resurfacing and structures only. Improvement costs were for the most part developed and applied on a cost-per- mile basis for roadway improvements and on a cost-per-square-foot basis for structures. Unit costs based on 1909 prices were broken down both by cost com- ponent and type of work. Also, a prorated allowance for preliminary and con- struction engineering was included in the costs. The appraisal of needs on the Interstate System, while it involved no special techniques, was unique in a sense that deserves explanation. There~ were two specific types of needs considered in conjunction with the Interstate System: the first was the cost to complete the System, and the second was the additional needs which will accrue on the Systems between now and 1990 which are in- eligible for Interstate System funding. The latter were estimated on the same basis as needs on other arterials using the existing conditions criteria and design standards. The needs reported represent the latter. PAGENO="0081" 75 TABLE I-ALTERNATIVES TO FULL HIGHWAY NEEDS -......-...... ~. .. [Costs billionsi .~.. 1973-90 * . 1973-90 needs needs reduce - decrease HTC in 1990 operation . ~ . . ADT by speed- Combined 1970-90 1973-90 Backlog 20 10 mph. reduction needs in needs in needs in percent V/C to 1 ADT, 1969 1971 1971 1971 1971 speed and dollars dollars dollars dollars dollars V/C to 1 ** (1) (2) (3) (4) (5) (6) Rural: Interstate Other principal arterials Minor arterials 4.8 5.5 0.3 4.1 4.0 3.8 50. 4 55. 9 32. 5 49. 9 42. 7 39. 3 48. 6 55. 0 33. 5 49. 3 40. 0 42. 8 4 28. 2 40. 1 40. 5 39. 7 Major collectors Minor collectors Locals Total on arterials Total on. FA eligible systems.. Total nonlocal 38.4 43. 7 52. 3 35. 1 50. 7 52. 3 50. 7 109.6 103.8 116.4 66.3 103.3 92.7 85.9 142. 2 157. 8 94. 5 143. 4 133. 2 125. 6 185. 9 210. 1 129. 6 194. 1 185. 5 176. 3 Total Small urban:: 295.5 .3 (1) .2 .2 .2 lnterstate_ Other freeway-expressway Other principal arterials Minorarterials .2 3. 2 3. 5 1. 4 2. 6 3. 1 2. 3 8. 1 9. 0 4. 4 8. 5 9. 0 8. 5 6.6 7.5 3.6 73 7.3 7.2 5.9 3.1 5.8 5.9 5.8 Collectors Locals Total on arterials 5.1 13.4 18. 1 20. 3 9. 4 18. 6 19. 6 18. 4 Total on FA eligible systems (nonlocal) Total 23.2 26. 2 12. 5 24. 4 25. 5 24. 2 36.6 Urbanized: 8.6 1.8 6.7 8.2 6.7 Interstate Other freeway-expressway Other principal arterials Minor arterials 7.5 65. 5 73. 9 28. 9 56. 1 70. 9 56. 1 37. 2 41. 5 21. 7 40. 8 38. 9 38. 0 40. 0 45. 4 20. 2 43. 1 43. 7 42. 3 22.6 11.9 22.2 22.5 22.0 Collectors 19.6 Locals Total on arterials Total on FA eligible systems (nonlocal) Total Total: 60.0 150.2 169.4 72.6 146.7 161.7 143.1 169. 8 192. 0 84. 5 168. 9 184. 2 165. 1 229.8 1 148. 3 268. 6 274. 0 247. 4 Total on arterials Total. on FA eligible sys- tems 272. 1 335. 2 376. 0 191. 5 336. 7 342. 9 314. 9 226. 6 367. 4 395. 2 365. 6 Total nonlocal 378. 9 428. Total 561.9 . 1 Less than O.05B. Note: All data excludes the cost of Interstate completion. Table I illustrates the sensitivity of the total 1990 highway needs to changes in the assumed travel and criteria (minimum tolerable conditions) used for the 1970-1900 highway needs study. The column 2 total of $428.3 billion represents the total non-local highway needs for a 18-year period (1973-1990) in 1971 dollars under criteria used in the 1970-1990 study. If travel were reduced 20 percent below the assumed study level of 1,863 billion VMT, total needs would be re- duced by 10 percent to $387.4 billion. This reduction in travel would represent a 2-percent annual growth in travel which is reasonable considering the mount- ing pressure for controls on the amount of private automobile travel to reduce petroleum consumption. The results of a 20-percent reduction in 1990 travel are illustrated in column 4. Column 5 represents the result of a lower level of service than for the minimum tolerable conditions used in the 1970-1990 needs study. These criteria represent a level below which no road or street in the country would be allowed to fall. Combining the reduced travel estimate with the modi- fied base - criteria would result in an estimated reduction in total 1973-1990 non-local ueeds of 15 percent or $62.7 billion with a new needs of $366 billion in 1971 dollars as shown in column 6. 50-194-75------O PAGENO="0082" 76 Ever since the 1972 National Highway Needs Report was published, a mis- conception or misinterpretation of the needs data has arisen. There is a tendency to attempt to compare the total highway needs figure reported, with the present level of the total highway capital improvement program in the Nation, and con- elude that the overall program level must somehow be increased to at least meet a majority of the needs. This, of course, is neither a logical nor a practical interpretation. Referring to table I, a reexamination of highway needs for the period 1973- 1990 shows that an estimated $428.3 billion is required for all needs. Of this total, $226.6 billion (column 3) is backlog (presently needing improvement) and the remainder will be generated by future travel. A result of modified minimum tolerable conditions and a possible reduction in the rate of future travel is that total 1973-1990 non-local highway needs could reasonably be estimated at $305.6 billion (column 6). The anticipated needs then for future travel is approximately $140 billion over a 18-year period. The 1970-1990 National Highway Needs Study concluded that there existed $200+ billion in backlog needs. This means that for all non-local highway mile- age failing to meet minimum tolerable condition in 1970, $200ą billion would be required to improve these facilities to accommodate traffic for a 20-year period. This figure was modified in the 1974 National Highway Needs Report to reflect 3 years of obligations, in 1971 unit costs, the results of which are illustrated in column 3. It should be pointed out that backlog "deficiencies" can never be considered a static condition, one which will eventually be eliminated. There has always existed in this country as in all countries, a backlog of projects, be they high- ways, schools, or hospitals. which are to be financed in some order or priority. It cannot be assumed, nor was it implied in the 1972 National Highway Needs Report, that this eacklog of highway needs be eliminated. In fact it is possible that the backlog as measured in 1970 was smaller than previOus time periods. indicating that the overall program level was sufficient to reduce the backlog. This cannot be shown at this time since national backlog needs were never measured prior to the 1970-1990 Highway Needs Study. The backlog should be thought of as the state or condition of the various functional systems at a particular point in time or as a measure of performance expressed in dollars. The performance represents a composite of all highway mileage, some in excellent condition, some in fair condition, and some in poor condition. The backlog is arranged in priority order by the various controlling jurisdictions with those sections requiring immediate improvement and/or having the highest benefit to cost ratio on ton. As funds become available the backlog is decreased. However, continuous and/or increasing travel will create additions to the bottom of the backlog priorities. In this manner the backlog of highway needs is clearly dynamic through any ieriod of time and to totally eliminate the backlog would essentially end the program until some~ new- backlog n-as developed. Since it is reasonable to expect a backlog of needs to exist at any point, the question becomes one of magnitude. Our roads and streets in this country are Probably among the best in the world today. Of course there is congestion in our urban areas primarily during peak hours, but no one can expect to eliminate all congestion. There are also many miles of unsafe roads and our current programs are now geared to reduce this mileage. The point is that our current total system is in good condition and it is reasonable to make the performance of this system a standard of measurement. Assuming, then, that we wish to have, in 1990. a system of roads and streets functioning as they do today, our goal would be to at least maintain the backlog, or performance level, or possIbly reduce it l)etween now and 1090. Tt was shown earlier that the program level needed to maintain the current backlog level was $140 billion, The total combined Federal-State-local highw-av program is currently $10 billion on non-local capital improvements. (See table II.) Between 1973-1990 this would generate $180 billion in improvements in constant dollars. Subtract from this the estimated cost to complete th~ Inter- s~ `tte System of ~25 billion `md w e are left with ~1'S~ billion The conclusion reached from this analysis of highway needs is that the current combined~ funding level of the Federal, State and local governments is sufficient in constant dollars lo maintain the current level of performance of the Nation's highway plant. PAGENO="0083" 77 The Federal share of total highway capital expenditures has been substantial over the years. Historically, Federal funds, including Interstate, have on occa- sion, accounted for nearly one-half of all current highway capital expenditures (1903), but have declined to less than 40 percent today. However, focusing exclusively on only the ABCD systems, the Federal share is in the 20 percent to 30 percent range. This report specifically addresses non-Interstate capital iteeds thus highlighting arterial and collector highways eligible for~ inclusion in Federal-aid systems. TABLE 11.-ESTIMATED CAPITAL OUTLAY BY FUNCTIONAL SYSTEMS I . [In millions of dollarsi Year Interstate Other arterials and collectors 2 Subtotal (nonlocal) : Local * Total 19743 1973 1972 1971 1970 1969 1968 1967 1966 1965 3,544 3,910 4,303 4,182 4,033 3,742 4,000 3,835 3,718 3,474 6,028 5,817 5,794 5,925 5,369 4,611 4,412 3, 953 3,778 3,410 9,572 9,727 10,097 10,107 9,402 8,353 8,412 7, 788 7,4911 6,884 2,377 2,205 2,171 2192 2,166 2,055 1,926 1,865 1,742 1,488 11,949 11,932 12,268 12 299 11,568 10,408 10,338 9, 653 9,238 8,372 1 These data update expenditures reported in ch. II. 2 These data correspond to the 1970-72 obligations mentioned in ch. Ill. By summing 3-yr. periods, e.g., 1970-72, 1971-73, or 1972-74, expenditures of $17,100,000,000, $17,500,000,000 and $17,600,000,000 approximate totalarterial and collector obligations of $17,600,000,000. Preliminary. Senator STAFFOTiD. I guess you have already gone into this, but with respect to the States' ability to match Federod funds, have you a fairly accurate:estimate now of how many States~if any, might he un~tb1eto match, if the Federal program level were maintained at the $6.3 billion to $6.6 billion level for 2 fiscal years? Mr. rfIi~i.~NN In our last survey of the States, as I indicated earlier, about eight States indicated problems. Most of those were matching problems, but not all matching problems. As I indicated, we tend to believe that this matching problem has been biowiT out of proportion. Those States that have had, or presently do have a matching problem, indicated to us that they were willing to go to their legislatures and get additional funds. - I think the Governors indicated that, also. About 25 Statespresently have legislation which would increase the amount of funds that the States could use for matching. Senator STAFF0TID. rfha1T1~ you. Senator Do~rrxici. WTouid the Senator yield ? The last survey you referred to says eight States. Was that survey rendered on the question that Senator Stafford asked, or with reference to the $2 billion that was going to be released? 1-us question was with reference to 2 successive years at the rate lie indicated. Which was it? Mr. TIEMANN. On the $2 billion. Senator 1)OMENTCI. So that does not answer his question as to whether yo~ have a survey indicating whether or not the States- Mr. TIE~rAxN. Yes. The eight refers to the $2 billion this year. There may be other States that may have difficulties in 1976. Mr. LAMM. The number of States may rise to about 15 infiscal 1976. Senator STAFFORD. My question referred to the probienis States might have in matching if the Federal program were conthietecf for 2 fiscal years at the level of $6.3 billion to $6.6 billion a year. PAGENO="0084" 78 The differences in the question involved the $2 billion released from the funds. Here, your answer would be that there might be 15 States. Mi Lvn~r Yes sn, Sen~toi We `Lre "he~tdy `it the 6 6 piogiam le~ el foi fisc'il 1975, `tnd 01 1 curient estirn'ite is that eigi t States do have funding problems in 1975. Assuming we were removing any addi- tional obligation control restraint during 1976, the number of States that would have matching problems would be raised to about 15. Senator STAFFORD. Would it be possible to supply the committee with a list of the States that you are referring to? Mr. LA~I~r. Yes, sir. Senator STAFFORD. For the record? Mr. LA~r~r. Yes, sir. [The information requested follows:] Qu.estion~ Supply a list of States with matching problems. Eight in 1975 and fifteen in 1976. Answer. Following is a list of States with matching problems, broken down between 1975 and 1976: STATE5 WITH MATCHING PROBLEMS, FISCAL YEAR 1975 1. Delaware 4. Maine 7. Virginia 2. Iowa *.. 5. New Mexico 8. Wisconsin 3. Kansas 6. South Dakota STATES WITH MATCHING PROBLEMS, FISCAL YEAR 1976 1. Colorado 6. Minnesota 11. South Dakota 2. Delaware 7. Ohio 12. Tennessee 3. Iowa 8. Oregon 13. Texas 4. Kansas 9. Pennsylvania 14. Virginia 5. Maine 10. Rhode Island 15. Wisconsin Senator STAFFORD. Thank you, Mr. Chairman. The CHAIRMAN. Thank you. Senator Hart? Senator HART. Thank you, Mr. Chairman. Mr. Administrator, what studies have you done concerning the impact. of the Interstate Highway System on driving patterns and particularly fuel consumption? Mr. TIEMANN. If the Senator can be more specific with regard to the driving patterns- Senat~r HART. That is, do people tend to drive more if they have highways of this sort? Mr. TIEMAXX. Are you asking in the context of the present energy crisia-or. are you talking about in the long term, since the life of the Interstate.?. Senator HART. Well, regardless of context-maybe I am assuming something. that doesn't exist, and that is that you have conducted studies of driving patterns, and particularly as they relate to the Interstate System. Is that correct? Mr. TIEMANN. I will ask Mr. Lamm to make a comment. Mr. LA~r~r. Senator Hart, we have two different classes of study that are available. First, we have a review of the total implications of an i~nterstate System nationwide on travel. For instance, the mileage of the Interstate System is. only about 1.2 or 1.3. percent of roads and streets around the country, but we know PAGENO="0085" 79 when the entire system is completed, it will carry about 25 percent of the vehicle miles traveled. This would be one example, and we could show a pattern, of inter- state mileage open to traffic and the growth of travel on those highways. You can also show a longer term growth in vehicular travel that preceded the Interstate System, and frankly, from my recollection, you cannot really visualize much of an increment that would be related strictly to the Interstate System. That would all be at the national level. Then there is a second class of studies which we have available which deal with individual routes on the Interstate System, and they show in many cases a relocation of travel which would have taken place anyhow, but would be funneled and channeled into the Interstate, because it happened to be the best travel facility around. In many cases, we find this facilitates traffic, and doesn't reduce fuel consumption, because there is no stopping and starting. Senator HART. These same studies indicate that the system induces automobile transportation particularly? Do they indicate that or not? I think what you are suggesting is that people are going to drive their cars anyway, and they can get there faster this way, and perhaps more efficiently. Mr. LA~r~r. Yes. We do not have any figures that would show that there is a large increment of travel which is created just because there is an interstate system there. Looking at the individual segments, though, there may be traffic redirected to the Interstate System that would otherwise have located in a different corridor to go into town, say, on a different route. Senator HART. I think you are extrapolating, also, t.hat the same patterns would hold for fuel consumption. I think you have suggested that this may be fuel efficient. Mr. LAMM. In many cases, yes, sir, particularly with the status of the system's completion that wehave now. Frequently, closing a gap in the Interstate System has great safety benefits and also avoids quite a bit of indirection of travel. You can drive from here to Florida, for example, on 1-95. Considering your- self an individual traveler, you would waste a lot of time at the gaps when you had tO leave 1-95. Senator HART: Have these or any other studies that you have had looked into the impact of the increased gasoline taxation: on driving patterns? Mr. LA~1~r. We have had some studies, both with our own forces, and in cooperation with the Federal Energy Administration of the price elasticity of demand for gasoline, and in the short term, it is fairly inelastic at low per-gallon charges. You have to get up into very sizable tax increases to recognize a considerable impact on the purchase of fuel. Senator HART. What range would that be? Mr. LAMM. I might supply it for the record, if I may. Senator I-TART. Would you? I think it would be very interesting. [The information requested follows:] Question. Economic elasticity of vehicle travel versus fuel costs. Answer. Most estimates of the price elasticity of demand for gasoline indi- cate a very low elasticity, especially in the short run. A study by Data Resources. PAGENO="0086" so Inc., A Study of t1~e Quarterly Demand for Gasoline and Impacts of Alter;iati'rc Ga~oiine Ta~eg, December 1973, prepared for the Environmental Protection Agency and the Council on Environmental Quality, estimates the short run price elasticity of gasoline to be -0.14, meaning that a 10 percent increase in price would cut demand by only 1.4 percent. Iii the longer run, as motorists sell their old cars and buy smaller, more fuel efficient cars, Data Resources, Inc. esti- mates gasoline price elasticity to be -0.28. Mr. Alan Greenspan. Chairman of the Council of Economic Advisers has stated "Although it is difficult to tell precisely, demand elasticity for gasoline looks to be about -0.2.'' Senator HART. I think what I am trying to get at is what appears to more and more of us something of an anomaly, which. if we do not have an energy shortage now, that more and more people are con- vinced that we are going to face energy shortages in the long term, and that may be 15 or 20 years, but that these shortages v-ill have an impact not only on our modes of transportation. but building. con- stluction, and so On. The question is whether it makes sense under those circumstances to continue expanding a. system which was designed for the 1950's. and contemplated almost unlimited petroleum products for all transpor- tation, when it now appears that those circumstances may not apply, and in all likelihood won't apply. Mr. LAMM. That is a very valid question. Of course. Congress has responded to that in the nrovisions of the. 1973 `legislation. which would permit States to delete segments from the Interstate System and substitute another transportation facility which will better serve their needs. I should point out that the highway program we are talking about is not by any means a complete new construction type of program. With regard to the interstate program. it is improving safety on exist- ing segments that date back to the early portions of the system. It is also a Program of closing gaps which is a national goal. that is to achieve the. eventual completion of the Interstate System. But, once you get beyond the Interstate System, we are dealino~ with a system of existing roads and streets that now is deteriorating. Bridges are reaching their 50-year expected life, and the pavement is reaching its 20-year expected life. Our program level just provides a continuation of the. Federal effort to keep the highway system func- tioning so that we do not perhaps have the same thing happen on the highway system that happened over the last 50 years with the railroad system. Senator HART. I apologize if you have already testified on this. and maybe it is contained in the statements th.at have been made. What per- centage of the funds that we are talking about. here are maintenance as opposed to new construction? Mr. LAMM. None would be maintenance, because maintenance as an activity is prohibited f rein any Federal funding. There is a. very siz- able portion, if you go below the interstate category that is used to prevent deterioration and obsolescence. It is in the range of 70 percent of the total dollars that would be tied up on inWro~ements to high- ways which already carry traffic. There is little creation of new roads. Senator HART. Maybe I am using the wrong term. You talked about preventing deterioration. 1 Business Week: July 27, 1974, p. 58. PAGENO="0087" Si ~s'1r. LUTZ. Senator, maintenance has been defined as sort of cutting the grass alongside the highways. rfhe State highway departments have the responsibility. You are correct that the program is geared towarci rehabilitation, overlay, and so forth. We are trying to bring that more into the program to keep the infra.- structure the same as it is now. So, you are correct. \Ve are trying to shift the program into more ot the pieveiit ton of deterioration, but we do not see Federal funds paying the salaries of people filling the pot- holes or those keeping the grass cut. Senator HART. I am learning the terms of art. Could you give me ballpark percentages, then, of rehabilitation versus new construction? Mr. LAi~1M. May we supply that for the record? I used a figure. just recently in the vicinity of 70 percent of all dollars below the. Interstate System, but I would like to check that. Senator HART. I would appreciate that. [The information follows:] Question. Percent of Federal dollars spent on rehabilitation of highways versus construction. Answer. It has been our experience over the years that approximately 70% of highway improvements consist of reconstruction. In the past year almost 50% of Interstate construction costs have been spent for reconstruction. Senator HART. Thank you, Mr. Chairman. Senator BENTSEN. When you get over an inch of new surfacing- that is construction-don't you have a classification? Mr. TIEMANN. I will ask my engineering and traffic operations man to be a little more specific. We have redefined construction in several instances, and loosened the interpretation on measurements of overlay and so forth. Mr. LA3LM. It used to be that we had an arbitrary figure that the pavement above 2 inches was worthwhile financing with Federal-aid funds. In recent years, particularly when the skid resistant quality of pavement became known to have significant safety implications, ad- j ustments in the criteria have been made. There is no arbitrary figure. \~Te wouldn't say that if the State proposed an overlay 1-inch thick we would agree, and if they propose.d seven-eighths inches, we would not; we do participate in overlays of about half an inch, if they are tied specifically to improving skid resistance. Senator BENTSEN. Senator Domenici. Senator Do~iENIcI. Thank you. I listened to you and I went back to your statement and reread the portion which said: "In addition, we estimate that as many as 71,000 additional ancillary job opportunities may be induced for a total of 126,000." Now, Governor, it is my recollection that last year Congress, in title X of the public service job bill, for the first time in history re- quired that each agency of the Federal Government having ongoing programs evaluate or inventory the job intensity of those ongoing programs. They were supposedly to report to the Secretary of Coin- inerce and the Secretary of Labor. We are soon to get that report. Now, are the figures that you gave us figures that you are going to give in response to that inquiry, or are you doing a more specific in- quiry with reference to title X? .; PAGENO="0088" 82 Mr. TIEMANN. The figures I gave i~i my testimony this morning will not be the figures we will supply as a result of the study on title X. Senator DoMExIcI. How do you propose to do the study for title X? \~That is your understanding of what you are to produce? Mr. TIEMANX. The survey has already been completed andreported to the Department of Commerce. Senator D0MENICI. Do you recall what it reveals in terms of the job intensity of the ongoing programs? Mr. TIEMANN. Yes, sir. And we can supply that for the record. Senator Doi~rExIcI. Would you make it part of the record, please? Mr. TIEMANN. Yes. Senator Do~rrxic~. Could we have the summary now? I would like to see them while I continue my questioning. Mr. TIEMAXN. \T\Te can give you the resume. Mr. LAMM. What we have here is a summary of the report we sub- mitted to the Commerce and Labor Departments through the Secre- tary's office. I think for the record it would be better if we provided you our entire submission. Senator D0MENICI. Mr. Chairman, I would ask unanimous consent that their report and the summary be made part of the record as soon as the report is delivered. [At this point Senator Hart assumed the Chair.] Senator HART [presiding]. Without objection. [The information requested follows:] SUMMARY AND REPORT ON TITLE X INVENTORY STUDY Attached is a COPY of a summary statement and our submittal to the DOT Deputy Under Secretary for Budget and Program Review for consideration for proposals from DOT to the Department of Commerce for highway projects under the Job Opportunities Program. We have been informed that only the $20 million of direct Federal highway construction was recommended to the Department of Commerce by DOT for fund- ing under the Job Opportunities Program, since almost all of the projects pro- posed by the States are eligible for Federal-aid funding and could be covered by the recent release of $2 billion of additional Federal-aid highway funds. SUMMARY STATEMENT FHWA'S POSITION AND RESPONSE TO REQUESTS FOR PROPOSALS FROM DOT UNDER TITLE N OF THE JOB OPPORTUNITIES PROGRAM AS PROVIDED BY TITLE III OF TIlE EMERGENCY JOBS AND UNEMPLOYMENT ASSISTANCE ACT A recent survey of 20 States that were identified as being in the high unem- ployment category stipulated for eligibility under Title III of the Emergency Jobs and Unemployment Assistance Act indicated that $883 million worth of work could be put underway within 60 days. This amount of work would gen- erate approximately 16,000 man-years of work on-site, 17,500 man-years of work off-site, and 44,000 man-years of work would be induced. Appro~imately $50 million of this could be devoted to safety improvement projects. In addition, about $50 million would qualify for funding under Title I of the Emergency Jobs and Unemployment Assistance Act and it is our understanding that re- quests for this funding should be made through the State Governor's office. This work involves maintenance type activities that are not currently eligible for Federal-aid funding. The above estimates were made prior to the receilt release of an additional $2 billion of Federal funds for highway construction. Since the great majority of the $883 million worth of projects identified by the States are eligible for normal Federal-aid funds, it is believed that most of this work will be accom- plished by utilizing a portion of the $2 billion of additional Federal-aid funds recently released. PAGENO="0089" 83 A survey of our direct Federal highway program indicates that approximately $26 million worth of construction would qualify for funding under Title III of the Emergency Jobs and Unemployment Assistance Act. This work would create approximately 475 man-years of on-site work, 515 man-years of off-site work, and 1,300 man-years of induced work. Almost all of these projects are constructed for other Federal agencies such as the National Park Service, the Bureau of Indian tAffairs, and the Bureau of Land Management. Therefore these projects would not be included under the recent $2 billion Federal-aid fund release. As a result of the above considerations, only $26 million of direct Federal highway construction was recommended by DOT for funding by the Department of Commerce under Title III of the Emergency Jobs and Unemployment Assist- ance Act. FEBRUARY 7, 1975. Hon. THEODORE C. LUTZ, Deputy Tinder yecretary for Budget and Program Review. Attached to this memorandum are listings of Federal-aid and Direct Federal Highway ijroject activities which have the potential for stimulating the creation of jobs in high unemployment areas. We apologize for not providing you with all of this information in the format requested in your January 30, 1975, memo- randum but because of a delay in receiving your memorandum this information was put together in only one clay. The American Association of State Highway and Transportation Officials has presented us with the attached rough estimate of highway w-ork that could be undertaken within a short time period to provide increased employment op- portunities. This consists of a sampling of 20 States that have been identified as being in the high unemployment category as stipulated for eligibility in the job opportunities program. This sampling indicates $883 million worth of work could be put underway within 60 days on a nationwide basis. It is estimated that this amount of work would generate approximately 16,000 on-site jobs, 17,500 off-site jobs, and 44,000 induced jobs. The majority of these projects would be completed w-itbin a year's time. Either Title X funds of the Job Opportunity Program or an additional release of funds under the Federal-aid highway pro- gram could be used to finance this work. 23 U.S.C. 152, 153 and 405, and Sec. 203 of the Highway Safety Act of 1973 established categorical safety programs addressing elimination of high hazard locations, elimination of roadside obstacles, safer roads demonstration program and a rail-highway grade crossing program. The average cost per project is $67,000 and most can be completed in a few months time and can be constructed with force account methods to expedite the improvement. Normally these projects are built within existing rights-of-way and do not require a long lead time to get underway. It is estimated that $50 million worth of these projects over and above the presently apportioned $250 million could he spent by the States. Either Title X funds of the Job Opportunity Program or an additional release of funds under the Federal-aid highway program could be used to fund these safety projects. It is estimated that approximately 1,000 on-site, 1,400 off- site, and 2,500 induced jobs would be created over a six-month period after start of work. These projects could almost all be completed in six months. Our Region 15 Office estimates that they could put 20 Direct Federal projects, estimated to cost approximately $26 million, under construction within the next six months utilizing Title X funds. Almost all of these projects are in the Appa- lachian area. Attached are the appropriate forms summarizing the project details. If you would like further information concerning the above estimates we will be happy to furnish you more details. L. P. LAMM. AMERICAN ASSOCIATION OF STATE HIGHWAY AND TRANSPORTATION OFFICIALS, Washington, D.C., February 6, 1975. Hon. JOHN BARNUM. Acting ~S1ccrctary of Transportation, Department of Transportation, Washington, D.C. DEAR Mn. SECRETARY: You have asked us for a very rough-cut estimate of highway work that could be undertaken within a short period of time to provide increased employment opportunities. All of the States could undertake immediately a high labor-intensive type of program which would he centered around such things as clean out and straight- PAGENO="0090" 84 ening stream channels and waterway openings through culverts and bridges; doing hand ditching; riprapping, etc., and to do minor 1andscaping~ work of re- moval of dead trees and brush adjacent to the roadside, reconstructing and re- placing damaged facilities at roadside rest areas, doing litter pickup. This type of program would provide one man year of employment for each $T,500 ex- pended, and we would estimate that the States could furnish supervisory personnel, small tools and equipment as part of their contribution to the pro- gram. Some States have already undertaken this type of approach. We would feel that there would be no difficulty in putting at least $1 million per State into this type of program immediately. Many of the States have already pulled projects from scl1eduled lettings for the 1975 fiscal year, due to cash flow or other difficulties. This obviously is having a detrimental effect on the contracting industry. Amounts deferred, as of January, by State were: Arizona, $0-SM; Arkansas, $30M; California, $190M; Connecticut, $15M; Georgia, $42M; Illinois, $TOM; low-a, 5250M; Louisiana, $80M; Maine, $1OM; Massachusetts, $8SM; Nebraska, $15M; New Mexico, $5M: Oklahoma, $20-30M: South Carolina, $12M; LTtah, 83-SM; Virginia, 820GM; Washington, $20-25M; and Hawaii, $OM. A quick sampling of various States also reveals the following information on projects that can be put to contract within a 30 to 00-day period. These are in addition to the million dollars per State projects listed above: Alaska-Within the next 60 days, they can put to work $1 million on board- walks, local service roads and marking of snow-mobile trails in remote villages where unemployment rates are quite high. Arizona-14 jobs providing 1,400,000 man hours for 35 million, as follows: Gila County, $5.7M; Mohave County, $11.8M; Navajo County, $0.8M; Yuma County, $4.7M; Pima County, $5.4M; Maricopa County, $5.2 M; and Cochise County, $l.3M. This would provide bridge repairs and a new- rest area. Arkansas-Could put $1 million to work in 30 days and $10 million within 60 days on grading, safety improvements to structures in the Little Rock and West Memphis areas. Iowa-Could place $33 million under w-ay in grading and resurfacing state- w-ide. Louisiana-Could put $54 million under way in 30 days and $18 million under way in 00 days on major and minor bridges. Minnesota-Could put $43 million to work on resurfacing and safety construc- tion improvements, Mississippi-Could put $40 million to work immediately on Secondary system. on resurfacing and safety improvements, and $87 million on an Interstate project in Jackson County by April 1st. New Hampshire-Could immediately put to work $10 million on mInor recon- struction statew-ide, $15 million on a toll road by April 1st, and $18 million on an Interstate project in Hiilsborough County by April 1st. North Carolina-Could put $5 million work of resurfacing to contract within 60 days in the follow-ing counties: Union, Wayne, Mecklenberg, Gaston, Rowan, Johnson and Cabarrus. Oklahoma-Can put $91,4 nilllion to contract within 60 days on bridges, safety improvements and resurfacing projects statewide. Rhode Island-Can put to work almost immediately $31~6 million on safety, sidew-aiks, bridges, obstacle removal and drainage statewide. South Carolina-Can put $l),"~ million to work within 30 days on resurfacing and safety improvements, and $11― million within 60 days on bridge painting arid shoulder widening. The above projects would be in Sumter and Marion Counties, and the cities of Greenville and Charleston. TTtah_Could put $34 million of resurfacing underw-ay statewide. Washington-Could put $40 million of resurfacing and $30 million worth of bridge `repairs under way. North Dakota-Total of $29 million worth ready to go within 60 days. $12 million on an Interstate project in Richland County, and $17 million for grading and resurfacing statewide. New Mexieo-$14 million of new construction in the following counties: Ber- nil1~, Donna Aria, Rio Arriha, Otero, McKinley. Valencia and Union. Tennessee-They could provide $70 million of construction work statewide. Michigan-Coi~ld provide $147 million of highway construction, and in addition $8 million for rehabilitation of railroad rights, of-way, $2.3 million for upgrading PAGENO="0091" 85 rail and bus terminals, and $2.3 million for converting a dial-a-ride bus building for construction. California-72 projects for a total value of $19 million that could be put under way within the next 60 days. In 31 counties of the State, time majority of the projects would be safety, landscaping, and resurfacing projects. Kentucky-$37 million worth of construction statewide. $25 million, in areas of high unemployment. Maine-Within 30 days, 15 construction projects worth $5 million statewide. Within 60 days, 30 additional projects of $15 million on resurfacing. This sampling of 20 States indicates $883 million worth of work that can be put under way within 60 days, nationwide. This should then represent a program in the approximate range of $2 billion that the States are equipped to handle. Over the years, data has been developed about the swan-hours of work created b) different types of construction. The following table was developed by officials of the Federal Highway Administration, based on data generated by the Bureau of Labor Statistics, concerning offsite and induced labor: IMan-hours per million dotlarsi Estimated Estimated offsite (1.4 times direct) induced labor Estimated indirect (3.5 times Type of work direct labor labor direct) Grade and drain 60, 711 84, 995 212, 489 Bituminous paving 29, 966 41, 952 104, 881 Concrete paving 30, 917 43, 294 108, 210 Structures 40, 238 56, 333 140, 833 Miscellaneous (safety, topics, etc.) 28, 846 40, 384 100, 961 We hope that this information will be of benefit to you. We would very strongly encourage the utilization of the highway program to provide jobs, and we would be pleased to develop more detailed information for you, should you consider this approach feasible. Sincerely, HENRIK E. STAFSETH, Executive Director. PROPOSED DIRECT FEDERAL CONSTRUCTION PROJECTS UNDER THE JOB OPPORTUNITIES PROGRAM-SUMMARY Total Total Priority project cost Iabsr cost 1-Bicycle trails $1, 500, 000 . ~650, 000 2-Bridges 2, 100, 000 760, 000 3-Grading end drainage 12,475,000 3,380,000 4-Paving 9,800,000 1600,000 Total 25,875, 000 6, 390, 000 Senator Doi~rENIcI. If you were telling the President of the United States the effect of the highway program in the United States. on un- employment, would you use 126,000 jobs per billion dollars as the impact on the economy, or not? Mr. TIE~rANN. Yes, sir, we would. May I point out that this is a rather elusive number. It is 126,000, and it is valid today, but it is con- tinually eroded by the impact of inflation. Senator Dol%rENIcr. Yes. If my arithmetic is correct and if your as- sumptions are correct, you are telling us that each billion dOllars of funds spent under present U.S. highway programs produces 16,000 jobs, more or less, and I divided that out and it seems to me you are talking about $7,800 per employee. Now we understand `many are PAGENO="0092" 86 making 22 and many are making 18, but you are talking about a ripple effect. The Congress in the interest of cutting unemployment passed the Public Employment Act, and we appropriated $8,000 per employee as a maximum, with administrative costs tocome out of that.. It appears to me if I were advising the President of the United States-as his economist-I could make a very good case for $1 billion of highway funds being far more effective than $1 billion worth of public service job money. I ask if that kind of point is being macIc to the administration with reference to the impact of highway funds on the ijresent recession? Mr. TTEMAXN. Yes. Senator, we have made that point with the ad- ministration, and evidence of that is the release of the $2 billion on the 13th of this month. Senator DOMENICI. I want to go back a little bit, this might precede your assuming your present office, but you were in office for part of it. Do you know, as the President impounded highway funds, obviously with the full concurrence of 0MB, whether or not the job potential of each impoundment was considered, or was just the inflationary aspect considered? Mr. TIEMANN. Maybe Mr. Lamm can answer that. Mr. LA~r1\r. Senator. each time we went through the budget cycle for the succeeding fiscal year, as those programs were developed, there was a full analysis. We have had figures for many years about the employ- ment impact of highway construction, and we were able to advise the Department, the 0MB, and the President's office that so and so many jobs would be created if the program level were at various points. [Senator Randolph reassumes the Chair.] Mr. LAMM. The impact on employment was a consideration. Senator D03IENIcI. With reference to the $2 billion in impoundments that was released, you indicated that you were trying to build in flexi- bility for States to put it to work as soon as possible. This is my first opportunity to ask you questions about it. I have read that you are talking about "first come, first served, let's get it all out there." Is that the policy with reference to the $2 billion, or are you going to allocate it to each State, giving them a reasonable time to come up with their match in accordance with the allocations heretofore estab- lished under the Highway Act? Mr. TII~rANx. Senator Domenici, we have advised our States through our division offices that the money would be available on a first come, first serve basis and the State could use it for the programs most imnortant at the time. We will not go on an allocation basis as we have with the normal pro- cedure. We felt we needed the flexibility. The States were under a. rathersevere time constraint by having to obligate the additional funds by the end of the fiscal year. We thought that we would remove administratively as many bar- riers as we possibly could. Senator Doi~rExIcr. Governor, in our Budget Committee hearings on the. impoundments, we found States that could not match-Rhode Island, Ne~ York, New Jersey, Connecticut, Maine. Virginia. New PAGENO="0093" 87 Mexico, and the District of Columbia. Many of those are in the process of ti `~ ing to find the rnone~ But we also found that there is a distmct difference between ~bligat- ing the funds on your part and then going to work on a project, and that there is `r significant difierence between an obligation and a job, therefore m'rking the figures of 126,000 potenti'rl jobs per million n relevant, depending oii whether the billion goes to work or is just obligated. With reference to the $2 billion, are ~ on attempting to cut the time betw ccii obligation and putting it to woik in any speci'd way, and will it be put to work sooner than the normal sequence of evehts under oblig ition ~ Mr TIrMAN~ Yes, sir The consti aints put on the States at the time we leleased the $2 billion, were one th'rt the St'rtes could not utilize more than 20 percent of the $2 billion for acquisition of the right-of- w a~, `md two the time span betw ccii which we give project approv'tl and before construction `mctuall3 st'mrts, is limited to only 43 days Sen'mtor DoMr~ 1(1 1 `mm not necessarily an opponent on the mor a torium on the rn'ttch `mt this point I sh'mie the concerns that Sen'mtoi Bentsen indic'mted, that e~ er~ one ought to be invited to put money where it will do the most good But it does ~eein str'inge to me that w e should, on the one hand, be ter ribl~ w on icil about w `uving the match- when a billion dollars could be put to work quickly and could produce 126,000 jobs th'mt `ue productis e, while on the other hand we `tie ap 1)101)1 iating $3 or $4 billion for public service jobs that `tie unproduc tn e in many inst'mnces, and admittedl~ so It seems to me one might w eigh the costs of the m'mtcir versus the cost of public semi ice jobs, `mud one might get `r 9 to 1 i'mtio you `tie rnoi e conceined, how e~ ci, about sctting a precedent of 100 per cent nn'mncmg Is that ~ Mr Tin~r vr\ `~ Yes \\Te undci stood the Go~ ci novs to s'i~ they w anted 100 Percent fin'mncing in peipetuit mclii 1ing nrunteii'mnce Sen'mtoi Tin rr~ici W~e met with then -Sen'itoi P'mndo1ph wr'Is `tiso theie I diiir't undeist mci pci petuity I thought they t ilked about 2 ye'mls The CI1AIr~r ~ Th'mt is con ect Mr. LAMM. rllhere. is one other impact of the waiving of .th~ matching icquneme it If you mix in `mU of the I~ edenal Aid ~10~i `trns together, tim Iuterst'mte `mud the 70/30, there is `mu aver `mge FederaI/~tate match ing ratiO of about 80/20. If ~ ou w au e the St'mte match, then the `tctu'ml pnogr'im level goes dow n b~ 20 pci cent bec'uise you am e only de'mhi g w ith 80 percent Federal funding which would influence the construction éiiijiloyment impact by 20 percent in the inflationary direction, the wrong direction `is w eli Sen'itoi Doi'rr'~icr I under st'tnci th~t ~ on `tie sa~ lug if States come up w itli a ni'mt~h e'meh billion dolhi s of I~ edei `ii mone~ usmg sour 20 p' icent `umiciage turns into $1 2 billion in highw i~ w oik I was icier ring only to the effect of the 20 peieiit in tennis of billions in 1ob p1 oduetion \ en smis `mpn ogn `mm w hem e ~ on `u e going to `tppr opi i'mte mone\ for jobs I think you have made an excellent case, perhaps iiniiitemitioIņmlly, but certainly for me, for spending more money this way than the other way, PAGENO="0094" 88 andwe can probably prove, that even on the per-person allocation of money that you produce more jobs with a billion dollars this way than you do with a billion dollars worth of public service jobs. That is my point, and I understand yours. SenatOr. STAFFORD. Would the Senator yield there.? I think what the Governor was trying to say was that if the match is waived for 2 years, it would be helpful, and after 2 years, the.States would resume matching. Mr.: Ti~rAxx. Yes. I think there are all sorts of problems in waiving a match, and admittedly our position is that the States simply have got to go back to their legislatures. Everybody is "biting the bullet" this year, and the States will have to do the same thing. . Npw, I guess it is irrelevant whether we are talking about the States who, came to us and said we want the money forever. The administra- tive nightmares are still there. Senator . IDOMENICI. I certainly agree with you, and I listed New Mexico,among those States, but I would also tell you that today New Mexico'$ Legislature is acting to provide the match. I think New Mexico `will take care of it. Let me ask you about conservation as it relates to the o.-mile-an-hour speed `limit, although it is not terribly relevant to today's hearings. Senator Hart raised the question of conservation, however. The U.S. Congress has now set the 55-mile-an-hour speed limit on the Interstate Highways. What are you doing about enforcing it, or not enforcing it? We have been very reluctant to put you in the policing business, but I think the last time Senator Randolph proposed the reduced speed, it passed rather handsomely in the Senate. There was real accord that we `ought to get serious about the 55-mile-an-hour speed limit. What are you doing about that? Mr. TIE~rANx. We have had many deliberations within FHWA and within the, Department of Transportation. Presently, we along with the National Highway Traffic Safety Administration, have come up with a proposed regulation as to how we could best monitor the en- forcem~nt of the 55-mile-an-hour limit. We are in complete agreement with you. We don't want to set up a Federal police' force. We don't think that is the proper thing to do. Nor do we think the Federal High- way A~ministration people ought to be sitting on the side of the road with ,a stopwatch. We are `proposing that we develop a system under which we would monitor the procedures by which the States are enforcing the. 55-mile- an-hour. speed limit. When that monitoring system is finally put into effect, we would advise the States that we would have criteria by which we would or would not withhold Federal funds if they are not enforc- ingit., It is a' difficult area, and we don't want to take away the' State's authority in this matter. Senator D0MENIcT. Governor, don't you feel rather seriously bound by the policies set by the Congress of the United States to see to it that the Stai~s come up with an enforcible 55-mile-an-hour speed limit? Mi~.. TIEMANN. Absolutely. We are as serious about this a~ Congress was when it passed the law, but we want to avoid the establishment of a Federalpolice force. . . ` " PAGENO="0095" 89 SenatOr Do~iENIcI. Have you as a starter indicated to the Governors of States what authority you do have if they don't see this is enforced? Mr. T'iE~IANx. That is what I was trying to make clear. When we have: the~ monitoring system finally in place, which we don't yet have, then we c~n advise the governors. "Here is the system which willmoni~ tor your enforcement procedures, and if you are not enforcing properly, we will ta~ke' sanctions." Senator D0MENI0I. I don't mean to be argumentative, but how long does it, take to come up with the monitoring system? We have the problem' now. The best conservation program that we know of on gaso- line is this one. It has been stated over and over again how many mu- lions:of barrels of crude this would save in the United States while we are going through the transition. So might I ask you how long do you think ~t.would take for you to have a monitoring program that you believ&\vill respect the rights of the States, but will put into effect the law oftheland? Mr. LAMM. The regulations that Governor Tiemann was' talking about, Senator Domenici, relate to the requirements in the 1974 High- way Amendments. This was an effort which we began after Congress passed the 1974 highway amendments, and this regulatory `process, because it'does involve a lot of the traveling public and everything~ will go to the full public review and comment process through the Federal Register.' Our draft is scheduled for publication in the Federal Reg- ister by, I would say-early March, if I am not mistaken-and I think we are on schedule for that. The' `1~74 highway amendments, as you know, were passed late `in 1974~' and really little time has elapsed since. But on top of that, as far as `promoting observance of the speed limits, we have had some actions underway well before enactment of this legislation, working through Governors' offices and through the individual highway depart- ments and State DOT's. Mainly these have been jawboning, and domonstrating the value to be gained by speed enforcement. A State administration that permits its drivers to travel faster than the 55 miles' an hour with no penalty is `in effect sentencing a few of those drivers: to suffer a fatality during the course of the year. That in itself ought to' be sufficient grounds for the State to doggedly enforce the regulatiQn of the speed limit as it is set up now. It is not anything that we are just beginning. Senator STAFFORD. Would the Senator yield? Senator DOMENIcI. I would be delighted to yield to Senator Stafford. Senator STAFFORD. Possibly you can't answer this question, but I remember reading statistics on a national basis that all speeds onhigh- ways'in the `United States excepting the Interstate System have been 57 milës'~in hour, and the average speed on the Interstate System has been 61 miles' an hour. Would either of you, or any of you, be able to comment on that? Mr. LA~n%r. What we have seen frequently are the results of spot studies One of the pioblems is that you can t put a clock on ever~ mo toiist on evei'v 1u~hway ever's minute of the d'~'s `tad n ght So ~ e do statistically. try to develop the prOper locations and the proper timing foi speed momtoi mg PAGENO="0096" 90 The figures normally relate to the flow of traffic observed at a point, or several points. For the speed study: to be valid, you have to begin with freeflowing traffic. The percentage figure you often see neglects everybody that is driving in an urban area. It neglects everybody who is commuting cluiing the morning and the afternoon ieak hour. It neglects everybody who is traveling late at night or during rainstorms when speed is slowed down. Those are not suitable times ~ conduct speed Studies. So if you deal with the total vehicle miles traveled on the int.erstates, the actual percentage of people exceeding 55 miles an hour is much lower. Senator STAFFORD. I got the impression that these figtires~ no matter how valid or invalid they might be, indicate `a substantial lowering of the average speed across the country since the 55-mile-an-hour speed limit went in, and while many people get the impression that the aver- age interstate traveler is still going 75 miles an hour~ they apparently are going nearer to 60. Would that be your observation? Mr. Tti~rA~cx. Yes, that is correct. Senator STAFFORD. Thank you. ` ` Senator D0MEXIcT. I have taken far too much time. rIlhe CHAIIiMAN. I would be happy to have you continue., Senator Dornenici. . Senator `Do~rENIcl. I will yield to you, since Senator Buckley has arrived, as well as yourself, and I wiii'try again later. The CI-TAIn~rAx. You will not only try; von will succeed. Thank you. You have been having helpful colloquy in: reference to the ~-miie-an-hour speed limit. I only want to express appreclatioll for Senator Hait's mentioning this earlier~ and Senator Domenici and Senator Stafford have followed through on the subject. : ``: I think it i,s important to know that there are some States `that are making a special effort. `` ` ` Just' so `the recordi may reflect it, I have written perso~~ally to the `Governors' on three occasions. It was to urge the Governors to' see that `the speed' limit' is enforced. I did that prior to our action'making it a national .st~tute, because we have felt that not enough was `being done. [The. letter to the Governors, referred to above~ follows :]~ t.S. SENATE. COMMITTEE ox PUBLIc Wowns, Washington. D.CY.,Jiily'lO, 1974. DEAR GOVERNOR: On June 7 and October 2, 1973, I wrote to you concerning a "Sense of the Congress' resolution proposing that the States voluntarily reduce speed limits to s~e lues and consei~e enelg\ I expie~sed the ho1e t1 `it you would join in encouraging activities that would assure adequate supplies of energlr for all our people. Subsequently, as you know, Public Law `93-239. estab- lishing a uniform nationwide energy conservation `speed limit, of 55 miles per hour, became effective on January 2, 1974. This measure has been of intense interest to me. ` The responses from' you and other govei'nors has been gratifyihg. Through your cooperation and efforts, this law has resulted in a substantial reduction in traffic fatalities and great savings of fuel. The value of this measure and the strengthen- ing of these crucial improvements will depend on the vigor with which the 55 miles jier hour speed limit is enforced. I am writing now to urge continued strong enfOrcement of the nationwide 55 miles per hour speed limit'. With the coming of Summer weather and long holiday weekends; thany of our citizens will l)e traveling on the Nations highways. Yet, in recent weeks there PAGENO="0097" 91 have beeii indications that our resolve to conserve energy was, indeed, short-lived. There are reports that traffic is returning to its pre-embargo levels, although the UnitOd States is far from resolving, its fuel supply problems. The original reason for the uniform speed limit was the conservation of scarce fuel, and the Federal Energy Administration now estimates that the 55.nii,l~s per hour speed limit is resulting in daily savings of as much as 200,000 barrels of fuel. ` But there is a second and. very., substantial benefit to slower driving.,~ Enact- ment of `the `uniform 55 miles per hour speed limit enables us for the first time to observe on a national basis the impact of slower speeds on highway safety. [`lie result has been o th'~rn'ttic drop in higliw ay fatalities According'to statistics from the National Highway Traffic Safety Adnilnistra- tion, dtiring the first five months of 1973, 20,843 persons died on our Nation's highw a~ s During `t comparable period in 1974 15 930 peisons died Thus duung the five-month period since the passage of P.L. 93-239, nearly 5,000 fewer persons have beei~ killed in traffic accidents than in 1973. It is to save live~ and conserve energy, then, that I earnestly ask for `your continued vigorous enforcemOnt of the nationwide 55 miles per hour speed limit. It is my belief ,that citizens generally desire to cooperate in this vital endeavor, as evidenced in a recent national poll showing that nearly 75 percent of those interviewed' favor keeping the 55 miles per hour speed limit. In addition to the practical importance of this program, they recognize that less pressured driving means more `pleasant driving. With esteem and best wishes, I am ` Truly, JENNINGS RANDOLPH, Chairman. The ChAIRMAN. I am not sure some of the officials realize the sav- ings that can be achieved by the lowering of speed limits. We do know that 5 million gallons of gasoline can be saved every day if there is enforcement across the board of the speed limit. Most States, I think, recognize that their police officers would not make an arrest if someone were going 56 or 57 or 58 miles an hour. That would vary. I hope that it won't be necessary for you to withhold Federal funds for highway construction from States if they don't enforce the speed limit. Would you do that? Mr. TIEMANN. Yes, Otir plan is that when we have the monitoring process completed, and we find the State is not in compliance and not enforcing,' that"we will withhold funds. The CHAIRMAN. The act provides for the withholding of funds for other purposes. What are those? Mr. TIEMANN. Safety standards, beautification, and speed limit enforcement. The CHAIRMAN.' What about vehicle weights? Mr. TIEMANN. Yes; weights and sizes. The CHAIRMAN. So you have a mandate, do you not, from the Congress? Mr. TIEMANN. Yes. The CI-IAIRMAN. In the 1974 act? Mr. TIEMANN. Right. The CHAIRMAN. You have no hesitancy in using it? Mr. TIEMANN. No. The last time we used it was in my own home State of Nebraska, for safety standards. The CI-IAIRMAN. I must not continue to belabor the savings, but they' are very substantial. The lessening of traffic fatalities also is a well- proven fact, not just an assumption. ` 50-104-7'5----T PAGENO="0098" 92 In the year 1974, traffic. fatalities in the Uniled States declined about 9,400 from the total of the previous 12 months. The traffic death toll, therefore, was the lowest since 1963. This trend has continued through the first 3 months of 1975. I would hope the President would respond to the request of the Senate in the passage of our energy conservation crusade. That was passed unanimously, and 67 Senators joined in cosponsoring the res- ohition I presented. It was strictly a bipartisan effort. and then we asked that the President designate a certain month as Energy Con- servation Month. Then we could have the reports to the Congress beginning on a monthly basis, of what the administration, in your agency and other agencies, are doing in the important work of energy conservation. Since that resolution passed, coming to our attention are many city and county energy conservation committees that have been formed. Senior citizens' groups have been formed to do something on the sub- ject. Colleges and universities have taken positive steps. Individuals are writing saying what they are doing and what they have proposed in communities. There is no desire by me to polarize the thinking of the White House as opposed to the actions of the Congress, hut I do hope the President will move to be the catalyst for this, and make a proclamation, which has not been done to date. I do know he has it under active consideration at the White I-louse, and I don't know whether you ever inject your thinking on a subject like this at the White House level, but I think it could well be clone, and it would not be inappropriate to perhaps give your feelings. Mr. TIEMANN. Yes. The Chairman makes a good point, and let the record show that the President has on numerous occasions indicated a very deep interest in the enforcement of the 55-mile-nit-hour speech limit. are under direct orders from the White House to come up with this program that we attempte.d to outline this morning. Those things are being done and being done as rapidly as possible. The CHAIRMAN. We know that the President, of course, is well-in- tentioned in the matter. Sometimes, we need not so much the blowing of the bugle and the ruffling of the drums, but we do need a leader- ship position on this, responding to the action of the Senate. In your statement, Mr. Administrator, you refer to the possibility of adjusting your budget estimate for fiscal year 1976. That would mean a change in the present budget proposal. What factors might bring about an adjustment toward a higher or a lower figure. Mr. TIEMANN. I will make a comment and ask Mr. Lutz to embellish if he would like. This proposal, when the estimate was being finalized 3 months ago with development starting about 15 months ago, the concern was one of combating inflation, which was at an unacceptable rate. Since that time, unemployment and economic recession have both gone to unacceptable levels. Therefore, it is reasonable to assume that because we are now combating inflation as well as recession and unein- ployment, if there is a change adjustment will be on the `cup" side. Mr. LA~I~r. One change that we know already will have to take place in 1976 is that. because of the release of $2 billion in fiscal 1975, PAGENO="0099" 93 the outlay figure which is estimated in the 1976 budget will have to be increased by about $1 billion. Mr. LUTZ. Let me say that the Governor is entirely correct. Both the Secretary's recommendations and the ultimate reflections of the President in the 1976 budget were put together prior to the release of the $2 billion. As was said, some of the comparisons are naturally distorted. I do think certainly that the budget is not a static thing. I do feel we have to take into account potential additional highway spending, and, potential demands that might be placed upon the budget for such things as railroad spending and mass transit spending-all of these have to be looked at in the overall prespective.' I certainly don't see the total level of $5.2 billion being revised in a downward direction. 0ą course, ~ er~ soon th'it ~ ill be distiibuted ctmong the States, `~nd once distributed, as a practical matter,~ it becomes messy to withdraw. We, of course, will continually assess the economy of the country realizing we have funds in these areas, and we will take a look at pos- sible adjustments in this direction, as well as in other transportation, railroads and mass transit and aviation programs. The CHAIRMAN. That helps us in our thinking. We realize there is a transition in these matters, especially with the problems of release of funds, `of unemployment figures, of the States and their partici- pation, `and we all look at it from the standpoint of Federal fiscal policy. ` The question `is asked so that the `record may show what you have said, which, frankly, I can understand, as you sit where you do today. Now, there is apparently, Mr. Administrator, some confusion about the availability of the $2 billion released to the States on a first come, first served basis. If you can tell `us in detail, maybe only for the record, the types of projects on which you anticipate the money will be used, and tell us how `the States can obtain approval in the obligation of these funds, that would be useful. Mr. T~MANN. We will submit something for the record, Mr. Chairman. [The following information was subsequently supplied:] Question. Listing of types of projects and State's methods of getting approval of projects generated by the $2 billion release. Answer. A primary goal of the release is generating employment. On that basis, our instructions to the field have called for not less than 80 percent of obligations for ~new projects and additional `work on existing projects to be for physical construction for which bids shall be opened or work started within 45 days after obligation of funds. Priority where possible is being given to proj- ects in areas of particularly high unemployment, projects to close gaps in the Interstate system, safety improvement projects and Mass Transit projects. Where work involves major items of equipment or materials such as bus pur- chase projects or installation of railroad-highway grade crossing protection devices, reasonable assurance is to be provided that employment generating action (firm orders for purchase) will be taken within 45 days after obligation of funds. With regards to methods of approval, there has been no substantial change other than the elimination of the need to establish availabiilty of obli- gational authority prior to project approval. Fiscal Control will be exercised at the Washington Headquarters. As the fiscal year progresses and we approach the $6.6 billion total available for oligation. restraints will again be imposed as necessary. Special employment reports will be required from contractors. PAGENO="0100" 94 [Telegraphic message] To: Each Regional Federal Highway Administrator-Regions 1 and 3 thru 10 and each division engineer (no foreign). Mr. K. C. KIPPLEY, Federal highway Admi:nistration, Depart nien t of. Tran sport cit ion, TT7ashingtom DXI. Ihe Pie~ident h'is ieleesed an additional S2 billion of Tedeiai aid `Iighw av funds for obligation in FY 1975. This action raises the total program level from ~4.6 billion to $6.6 billion for FY 1975. Effective immediately. States are author- ized to proceed with new projects or additional work on existing projects financed with any of the fuiids covered~ by .~FHWA notice N4520i6 dated July 24 1974 uniestiained except by the a~ ul'thility of appoitioned oi allocated funds provided that not less than 80 percent of the new and additional work shall be for construction, (work class 3, 6 or 8) and bids shall be opened or work started within 45 days after obligation of funds for the construction. In accordance with the President's desires, States should give priority where possible to projects in areas of particularly high unemployment, projects to close gaps in the interstate system, and safety improvement projects. Considera- tion should also be given to potential transit substitution projects in urbanized areas. All balances of FY 1975 obligation authority distributed by FHWA.notice N4520.16 remaining unobhigated are herewith withdrawn. Fiscal control will be exercised by the Washington office. Further advice will follow. Please advise State Highway Departments. NOTiBERT T. TImrANN, Federal Highway Administrator. Mr. TIE~rANx. It was our intention to make the funds available as quickly and as easily as we could so that the States could obligate as quickly as they could, particularly in the high-labor-intensiveprojects. This, of necessity, would be smaller projects, safety improvements, and types of projects that we have had over the past years. As I have indicated earlier, the large projects, the large Interstate projects. could not get obligated between now and the end of the fiscal year. We will submit something for the record, Mr. Chairman. The CuAn~rAN. That will be helpful. This one further question, and then, Senator Buckley, I will ask you to inquire of Governor Tiemann and his associates. I will not talk about the matching problems, because I think you have covered that, Senator Domenici, but I do come to the $2 billion figure again. That is said to be generally the maximum ~mount which can be obligated by June 30; that is, in addition to the previous pro- gram that had been recommended. Now, is that correct? Mr. TIEMAXN. That is correct, sir. The CHAIRMAN. I believe we muist look further down the road. I think we have to look to the years ahead, and that is why I am asking for your estimate, Governor, of the ability of the States and the highway construction industry to use funds in the 6-month period follow lug the first of July ~ Mr. TIEMANN. We indicated earlier in our testimony the States could obligate for the full fiscal year 1976 about $7.2 billion. We are talking. then, about $3.6 billion for the half year. The CHAIRMAN. Are you sure you have that available? Mr. LAMM. We don't have a more detailed breakdown to split the figures into the first and second periods of 6 months each. You can speculate that the industry, after gearing up to use an additional $2 PAGENO="0101" 95 billion for the remainder of fiscal year 1975 might slow down, but you could also speculate that once having attained this monthly pro- gram level, they might try to keep it up. The CHAIRMAN. I can understand that. I think that supplies the answer for our record. We are going to include, without objection from the members, statements that have been forwarded to the committee in reference to this subject mattei, fiorn the An'iei ican Road Builders Associ~tion, the American Association of State Highway `Ind Tvtnspoihtion officials, the Highway Users Federation for Safety and Mobility, and the Natidnal Crushed Stone Associatidn. If there are other organiza- tions, I extend to them the oppoiturnty foi their nvtteinis to be m'ide a part of the record. We want to have a record that will reflect the thinking of not only Government at various Ic v~ls, but associations, and organizations and, of course, concerned individuals. [The statements referred to follow:] STATEMENT OF DANIEL J. HANSON, Sr., EXECUTIVE VICE PRES~DENT, AMERICAN ROAD BUILDERS' ASSOCIATION Mr. Chairman and Members of the Committee: The American Road Builders' Association very much appreciates the opportunity to comment on the Fiscal Year 1976 budget program of the Federal Highway Administration. With respect to the Federal-aid highway program, the Administration has proposed a budget ceiling uf $5.2 billion. With the recent release by President Ford of $2 billion in previously impounded Federal-aid highway funds, the budget ceiling for Fiscal Year 1975 is now $6.6 billion. The budget ceiling for Fiscal Year 1974 was $4.5 billion, increased in the last month of that fiscal year to $5.0 billion. Percentage-wise, the proposed Fiscal Year 1976 budget ceiling is only 4 percent higher than the ceiling in, Fiscal Year 1974. This obviously is not nearly enough to offset price inflation. Compared with the current Fiscal Year 1975 budget, theproposedFiscal Year 1976 budget is down over 20 percent. The on ag'un off ag'un st'itus of the highway piogiam iefiec~s the action t'tl en by the Executive Bi'inch of Government as it h'is attemptec to altein'itelv cool do~in and he'tt up the economy The rele'ise of 52 billion in new higl~w av funding e'irlier this month w `is very he'iitening to the highway con~tiuetion industry We are confident that this ielease of funds will be extierneli useful in ci eating thoiis'mds of new jobs ~\ e~ ertheles~ the w ithholding fi om oblig'ition of highway funds which have been previously authorized by Congress is an Un- justifi'ible aiid extiemelv deturnent'il practice There are several valid reasons for this concern such as: 1 Long ranue pl'inning is essentril to `in efficient highw'tv piocr'im Ihe uncertainty of funding makes long-range planning extremely difficult if not impossible. 2 Interiuptions in the ni ogram w oil economn haidship within the couti ~tcting industi", `md all of the suppoiting industiies Conti'ictors must ~itiidi'mw from business or reduce their scale of operations when the program is reduced or shut clown 1.lie on `tg~tin off `igain conti'iction intl cxpansion of the highw `iv program is just not good economics. 3. The pay-as-you-go philosophy of the Highway Trust Fund provides a very positive and sound basis of financing. Deficit spending from the Trust Fund is not permitted. Likewise. the building of large surpluses, through the withholding of obligational authority, also violates the basic philosophy of the Trust Fund concept. 4. Impoundment only serves to distort the highway program originally intended by Congress. The several categorical authorizations a re, in effect, lumped together for the purpose of allocating obligational authority among the States. When obligational authority is substantially less than the suni total of authorizations, certain programs obviously suffer disproportionately. PAGENO="0102" 96 For example, the 1973 Federal-aid Highway Act included Title I authorizations of $0.208 billion plus six safety construction authorizations in Title II amounting to $475 million for Fiscal Year 1976. These authorizations were supplemented, in the 1974 Highway Act, by additional authorizations of about $700 million. In all, Congress has authorized $7.38 billion for the Fiscal Year 1976 highway program. With a FY 1976 budget ceiling of $5.2 billion, about 82 billion of this authorized work cannot be undertaken. Obviously, certain authorized programs cannot he funded. Past experience has shown that the States will generally utilize Federal aid for the larger projects. Programs involving smaller projects, such as the safety construction programs, will generally suffer the most. Let me cite just a couple of examples as to why the suggested $5.2 billion level of funding should be increased. - The program for completion of the Interstate System, as embodied in the 1956 Highway Act, called for the final authorization to be in Fiscal Year 1972, and that the Interstate program would be completed at that time. Extensive delays have occurred, due partly to some route controversies and other requirements but, more importantly, to cutbacks in the funding. The inadequacy of current Interstate funding was vividly illustrated by Department of Transportation w-itnesses before the House Transportation Appropriations Subcommittee on April 29, 1974. The following figures speak for themselves: Billion Cost to complete the interstate system as of January 1, 1973 $32. 3 Subtract obligations during calendar year 1973 3. 3 29.0 Add 15 percent inflation 4. 3 Total cost to complete, as of January 1, 1974 33. 3 These figures show a rate of negative progress. Assuming the same rate of inflation. With no increase in authorizations, the Interstate program would never be completed. Assuming even a low rate of inflation, DOT said the pro- gram would not be completed until the year 2007!!! This is obviously intolerable. It is essential to arrive at a prompt decision regarding those segments of the Interstate System which are still in controversy. We should also provide realistic authorizations and obligational authority for the remaining segments in order to complete the Interstate System as soon as possible. In 1971. the Department of Transportation reported that 89,000 of the 563,500 highway bridges in the United States (16 percent or one out of six of all of our bridges) are critically deficient. At that time, the cost of replacing these bridges was estimated at $16 billion. Recognizing the seriousness of this problem, Congress has established a Special Bridge Replacement Program. The current authorization level for this program is $125 million, which is made available at a 75-25 matching ratio. This generates a program of $167 million annually. Assuming no inflation, no additional bridge deterioration, and no impoundment, this level of authorization is sufficient to bring the critical bridge problem to a solution in only 96 years! Obviously, more funding is required to bring the bridge program to a conclusion at a much earlier date. ARPA strongly supports S. Res. 69, introduced by Chairman Randolph and co-sponsored by numerous Members of this Committee. The Resolution would deny the deferral of $10.7 billion in Federal-aid highway obligations, as proposed by the President in his deferral message of September 20, 1974. We recommend that the Senate pass this Resolution at the earliest possible date. There could be no more appropriate time to put an end to the impoundment of highway funds. The President, by releasing $2 billion of obligational authority, has signalled the Administraticn's interest in expanding job opportunities in the highway construction field. The Federal Highway Administration estimates that this recent release will be sufficient to fund all approvable projects submitted by the States during the remainder of this fiscal year. There is no reason to believe that the release of all impounded funds would result in a sudden and inflationary increase in the highway program. All of the normal problems of bringing projects to a state of readiness for contract award take time. Likewise, raising State matching funds will obviously ensure an orderly expansion of the highway program in the years to come. PAGENO="0103" 97 With the release of impounded funds, the program can be restored to its normal and intended status, with the rate of progress being controlled by Congress. We appreciate this opportunity to present the views of the American Road Builders' Association on this critical issue. AMERICAN ASSOCIATION or STATE HIGHWAY AND TRANSPORTATION OFFICIALS, Washington, D.C., March 10,1975. Hon. JENNINGS RANDOLPH, Chairman, Senate Public Works Committee, New Senate Office Building, Washington, D.C. DEAR MR. CHAIRMAN: At your suggestion, we are pleased to take this oppor- tunity to present comments on the highway budgetary matters which the Com- mittee on Public Works was reviewing in its hearing on February 27, 1975. AASHTO urges the immediate release of all impounded funds for highway construction. The most critical need to release these funds is to alleviate severe unemploy- ment problems, particularly in the construction industry. Unemployment in the construction industry is now estimated'to be from 15% to 30%. The Department of Labor recently reported that there were 500,000 less jobs in the industry in February 1975 than there were in February 1974. These unemployment statistics Show that there is severe economic distress for workers in the construction industry and also reflect under utlli~ed capacity in the industry. As the Committee was advised by witnesses frOm FHWA, the expenditure of $1 billion in highway construction generates approximately 126,000 jobs in on- site and off-site employnient for the construction and in induced employment. Furthermore, State officials estimate that each additional $1 billion of highway construction will require approximately 8,000 additional employees at various governmental levels for planning, designing, and supervising the contract work. This governmental employment should induce 28,000 additional jobs. Unlike some hastily created temporary public service jobs the employment will be used for needed construction to improve the efficiency and safety of highways and other transportation systems. By reducing transportation costs and by promoting development of under-utilized manpower and resources in rural areas with high unemployment, the highway improvements will enhance long-range economic development. The release of funds for improvements in highways and transportatioli sys- tems is consistent with other current programs to conserve energy, or to improve the environment. The availability of safer and more efficient highways may encourage a few people to travel who would not otherwise, but the vast majority of those using the safer and niore efficient highways would have taken the trip over older, more dangerous, and less efficient highways. The present scarcity and high price of gasoline places severe limits on discretionary travel. More efficient highways which provide more direct routes and improve the flow of traffic can assist in the conservation of fuel, particularly with the imposition of a 55-mile an hour speed limit, which AASIITO strongly supports. It also should be noted that some States will use some of the released funds for improvements for mass transit. The Member Departments of AASHTO have reported that they will be able to obligate all of the $2 billion in impounded funds released in February by June 30 of this year. They also would be able to obligate all remaining impounded funds by the end of fiscal year 1976. In terms of constant dollars and a percentage of the Federal budget, the Federal-aid highway program has been reduced significantly from 1957-58 levels. In those years, the amount of actual work placed under construction was approxi- mately twice the amount that could be accomplished with the $6.2 billion now available in fiscal year 1975. The Federal Highway Administration has reported that in the past the average construction time for a highway project is 14 months, and that the avera~e time between obligation and expenditure of funds is 18 months. These time periods can be reduced considerably if emphasis is placed on smaller projects as has PAGENO="0104" 98 been done for projects to be funded with the $2 billion of impounded funds released in February. Attached is a list of a sampling of such smaller projects which have been approved since February 12, 1975. In response to it questionnitire circulated by AASHTO in' December, 1974, 31 States reported that they were experiencing cash flow problems. (A summary of the responses is attached.) In many cases, the release of impounded funds would assist those States by making Federal funds available for needed projects which would be difficult to fund wholly from State funds. Some Statesmight, however, have difficulty in using newly-released impounded funds because of environmental litigation, or lack of matching funds. AASHTO supports appropriate measures, such as the easing of categorical restrictions or waiving of matching funds; to: assist States which might have difficulties in utilizing funds. The matching fund problem could become more serious if Federal tariffs or taxes increase, the price of gasoline, so as . to reduce consumption to .a great extent. In this regard, we strongly urge that `if Federal gasoline taxes should be increased, the States be given the opportunity to substitute new State gasoline taxes, in lieu of increased Federal taxes. AASHTO also endorses legislation which would eliminate pro~edura1 road- blocks caused by environmental litigation, such as those which have arisen in three States because of a decision of one U.S. Court of Appeals. which differed from five other Circuits onthe same issue, that FHWA could not accept environ- mental impact statements, subject to its supervision and approval. One other situation we would like to discuss is the relationship between Congressional action and pending litigation over the impoundment of highway funds. As of this date, there have been nine decisions by U.S. District Courts ordering the release of impounded highway funds for a total of 20 States. All of these orders,, with the exception of Missouri's, have been stayed pending review by the Courts of Appeal. The Court of Appeals in the 8th Circuit has affirmed the Missouri decision and its funds have been released, State Highway Commission of Missouri v. TToipe 47.9F.2d 1099 (1978). Although we believe the Courts will eventually order the release of impounded highway funds, particularly in view of the recent Supreme Court decision in the water pollution control cases.. we believe that passage of a resolution to release impounded funds would expedite the release and clarify the existing situation. We support Senator Muskie's position that . th.e Impoundment Control Act of 1974 (Title X of PL 93-349) did not give the President any additional substitutive authority to impound highway funds. Passage of a resolution to release deferred funds together with reaffirmation of Congressional intent that the Impoundment Control Act of 1974' did not create any new substantive, authority to defer ex- penditures of funds, would expedite release of the funds and clarify the present situation.' . . . We are pleased to have had this opportunity to respond to yo~r request and hope you will feel free to call upon us for any additional assistande we might provide. Sincerely, . HENRIK E. STAFSETH. Ecvecutivc Di,~ectoi-. Enclosure. Alaska: "` ` March .2-Advertising reconditioning approximately 1 mile of existing road- way and constructing two interchanges on Seward Highways. Bids opened 4/10/75-360 calendar days. February 27-Advertising grading drainage in asphalt surface. treatment of 12.9 miles of Richardson Highway SE. of Fairbanks, including two new bridges: Bids opened 4/3/75-368 calendar days. February 27-Advertising grading, drainage and aggregate surface plus bridge over Tonsina River N.W. of Chitina: Bids opened 4/3/Th-300 calen- dar days. February. 13-Opened bids on 11.3 miles of grading, drainage and aggregate surface on Minto Road-45 miles N.W. of Fairbanks for $1,550,000 work to be complete by 11/1/75. February 20-Opened bids on Ward Creek Bridge in Ketchikan for 5500,000 work to be completed in 210 days. PAGENO="0105" 99 California.: February 19-Authorized construction of maintenance station cost of Portersville for $284,000 to be complete this summer. February 19-Authorized Rest Area construction South of Los Banos on 1-5 for $870,000 to be complete spring of 76. February 19-Authorized Rest Area construction on Highway 99 South of Turlock for $725,000 to be complete spring of 76. February 19-Authorized `Vidal junction maintenance station construction for $321,000 no timetable. February 19-Approved $1,750,000 project for up grading rest stops at Donner Summit on 1-80 to be complete fall of 76. Colorado: February 20-Awarded $1,687,000 contract for 1-25 project in Denver- 180 days. February 20-Awarded $343,000 contract for new bridge on U.S.. 36 at Byers-60 days. 00 February 13-Awarded $319,000 contract for 2 Urban System projects in Colorado Springs-60 dayS. . : 0 ~0 *, . Florida: .. 0 0 0 ` 0 February 27-Opened bids on 26 road and bridge projects totaling. $12,459. Iowa: 0 0 . 0 Bids to be opened March 19 on maintenance garages: of West Burlington and at Spirit Lake. BidS to be opened March 4 on nine bridge projects 10. portland cement concrete paving jobs 26 asphatic concrete paving jobs 2 building demolition jobs, one lighting job and one guard rail job and 10 county road jobs. Bids advertised on Febr~iary 24 for 2 drainage structures, on February 25 for sewer improvements on February 26 for building' demolition and grading projects. `0 0 0 0 .0 ` 0 0 Minnesota Februaiv 13-Atheitised bids on highway and bridge pio~ects in 24 coun ties estimated at $18 4 million I ebruarv 27-An aided $234 000 contract foi 6 6 miles paving job in Pope (~O March 19-Bids to be opened on two projects estimated at $473,000 in Isanti and Watonwin counties. 0 . . 0 March 21-Bidsto be opened on 1-35W project in Minneapolis ~ extension of survellience system, paving, median barrier, lighting and bridge repaii~ start June 10 to be completed by August 3. 0 March 11-Bids to be opened on 4 grading and surfacing projects in Steele Co~ 0 00 0 0 Nevada: March 6-Bids opened on Safety projects on I-SO in Washoe Co. March 27-Bids opened on storm~ drainage project on Las Vegas. New Hampshire :0 0 February 26-Advertise for construction on 0.6 Mile of 1-93 for new inter- change in Hooksett. 0 February 26-Advertise for construction of new interchange Øfl: 1-95 in Hampton. February 26-Advertise for new interchange in 1-95 in Portsmouth. February 26-Advertisefor 1.6 mile of new shoulders and new surface on Rte 125 in Lee. March 5-Advertise new toll booths on I-OS in North Hampton. March 5-Advertise 3.9 mile of new construction and bridges on 1-93 in Hooksett~ . 0 March 12-Advertise new bridge over 1-93 in Hooksett. .0 March 19-Advertise for signing aild Lighting on 1-93 in Hooksett- O . Massachusetts. March 26-Advertise for construction of truck climbing lane .on Rte 16 near Jackson and reconstruction and new bridge on Rte 25 at Haverhill. New Jersey: . March 20-Open bids on Safety improvement project on Rte 79 in Marlboro plus project for lighting 1.S mile of I-SO in Bergen Co. to be complete by October. February 20-Allotted $22,000 to Newark to investigate feasibility of Van Pool program for city employees. PAGENO="0106" 100 March 13-Open bids on drainage and resurfacing contract on 1-78 in Warren and Hunterdon Counties-to be complete by September. New York: March 13-Bids opened on nine highway and bridge projects in Broome, Monroe, Montgomery, Niagara, St. Lawrence. Steuben and Suffolk Counties. March 20-Bids to be opened on 24 projects in 22 counties and the City of Albany. Pennsylvania: February 28-Opened bids on 20 projects totaling $3445000 in 18 counties. South Dakota: February 21-Let 18 construction and gravel stockpile projects totaling $2,900. Texas:. February 25-Approved $2,116.000 project for signing, lighting and cleline- ation on 1-45 in Dallas. Vermont: February 21-Opened bids for guardrail on 4.8 mile of 1-91 in Guilford and Brattleboro and bridge repair job on Rt 23 in Morristown. March 14-Open bids on new bridge in Westminister to be completed 12/1/75. March 21-Open bids on bridge repairs job on Rte 31 in Poultney to be completed 11/1/75. AMERICAN AssocIATIoN OF STATE HIGHWAY AND TRANSPORTATION OFFIcIALs QUESTIONNAIRE ON FISCAL CONCERNS (Results as of January 15, 1975) It has been brought to the attention of the AASHTO office that some States are experiencing financial difficulty because of a shortage in their cash flow that could be brought on by many factors. Additionally, there has been discussion within the Administration of a gas tax as high as 30c to be a penalty tax, i11 order to reduce the use of petroleum products. There is little question that President Ford is working on a reduction of one million barrels of petroleum used per day as a national goal for the next year. It appears that most of this reduction will fall in the passenger car area, since it uses 52.5% of the transportation energy consumption. Since the current daily use is 17 million barrels per day, and if you review the priorities of other consumption, it would appear that the passenger car is going to have to accept most of the reduction to attain the President~s goal. This would reflect at least a 6% reduction in passenger car use, and could go as high as 11%, if the total savings of petroleum was in this area. There are also indications that the goal in 1978 would probably be a reduction of three million barrels of oil per day. This would give strong indications of a needed reduction in the use of the passenger car of in the neighborhood of approxi- mately 15% to 25%. In light of the rather sober possiblities, how would this affect your Depart- ment? Would you please indicate your current situation by answering the fol- lowing questions: 1. (a) Is your Department currently experiencing cash flow difficulties? Yes 19 No 24 (b) Has your Department had to make personnel reductions in order to stay within your budget? Yes 22 No 27 If yes, could you indicate the approximate number of personnel reductions in your Department's total employment, as a result of current financial problems. 6700ą (c) Is your Department intending to ask for an increase in taxes. in order to offset the current anticipated reduction in gas tax revenues in 1975? Yes 17 No23 (d) If yes, would you please indicate if the tax is a gas tax, a license tax, a weight tax, etc. Fuel. 12; weight, 4; license, 5; and sales, 1 (e) Are you deferring lettings previously scheduled because of these dif- ficulties? Yes 23 No 25 (f) if yes, for what period of time? PAGENO="0107" 101 (g) In what dollar amount? $1,062 million ~ (h) Are there any possibilities that you may have to curtail or cancel projects that are currently let? Yes 3 No 43 2. (a) Assuming the Administration's goal of a fuel reduction of one million barrels a day in 1975 is met, which could mean a reduction in automobile travel of 6% to 11%, would you indicate if this situation would cause financial dif- ficulties in your Department? Yes 45 No 4 (b) Assuming that your Department would not be able to make an adjustment in State taxes, in order to adjust to the loss of revenues, would you please indicate if this would necessitate personnel reductions? Yes 42 No 4 (c) Ifyes, would you estimate the number of people that would be involved in a reduction of workforce. 13,000+ Assuming that the national goal in 1978 is a reduction of three million barrels of petroleum a day would cause a reduction of 15% to 25% in automobile use, w ould you please ansu er the follow ing questions 3. (a) Would this cause financial difficulties in your Department? Yes 48 Nol (b) Assuming that a State tax adjustment is not possible, would this require personnel reductions within your Department? Yes 45 No 3 (c) If yes, estimate the number of employees that would be affected. 27,500 4. Should the State matching ratio on Federal-aid highway projects be de- creased for a period of time to help the cash flow problems? Yes 31 No 15 5. (a) Do you share a portion of your revenues with local units of govern- inent? Yes41 No7 (b) If yes, is this on a percentage of receipts basis , rate per mile _~_, or other (explain) 6. Asa result of decreased revenues, are local units of government having diffi- culty in providing their share of matching funds on transportation projects? Yes 15 No 32 7. In the development of the urban program to be used within the cities of your State, would you, please indicate if the cities in your State are the cities having difficulties utilizing the funds because of their inability to provide advance funds to fund the program until they receive their payments after. the work has been completed? *Yes 7~ No 37 8. (a) Are you having difficulty making the adjustment to the urban system concept of the 1973 Federal-aid Highway Act by virtue of previous departmental pioject commitments'~ Yes 28 No 21 (b) If yes should theie be a transitional period of adjustment as to hou ni'~ny years should be provided to adjust to the new urban system concept? Less than 2 years, 1; 2 years, 6; 3.years, 11; 5 years, 5; and more than 5 yeais, 2 (\ame) (Title) - (Member department) - (Date) Norn.-Please return one copy of the completed questionnaire to the AASI-ITO Ceneial Offices no latei than Januai y 10 1975 . :. ... HIGHWAY TJ5ER5 FEDERATION, . . . Washington, D.C., February 24, 1975. ~ Hon. ,TENNINGS RANDOLPH, . Chairman, Committee on Public Works, U.S. Senate, Dirksen Senate Office Building, Washington, D.C. DEAR Mn. CHAIRMAN: I am writing in regard to the Committee's February 27 hearing on S. Res. 69 and the proposed fiscal year 1976 budget for the FecTeral Highway Administration. The Federation supports the intent of S. Res. 69-immediate release for obliga- tion of remaining fiscal 1975 and previous year deferred highway funds and the full fiscal 1976 authorization, $6.4 billion. Administrative "stop and go" funding in recent years has considerably handi- capped the orderly planning essential to the success of long-term public works PAGENO="0108" 102 activities such as the highway program. We hope that passage of S. lies. 69 will discourage disruptive obligational ceilings in future years. Statements from other organizations will deal with the direct. and indirect benefits of releasing deferred funds in helping to provide jobs and stimulate the economy. We feel that the continuing benefits these funds can provide to V the American people-through safety improvements, more energy efficient traffic flow, and more economical goods movement-offer equally persuasive reasons for passage of S. Res. 69. V V I V V V V I' V V Prompt completion of the Interstate System is a national goal of high priority, V but impoundment and inflation have eaten away at the productivity ofVtheInter- V state dollar. We V estimate that $3.3 billion in authorized Interstate funds have V been deferred, while highway construction costs have gone up at an average annual rate of V 12 percent over the last five years. If inflation continues at a V rate Of only 10 percent, each year's delay in use of these deferred Interstate funds cuts the money's value in "work on the ground" by $360 million. (see at- tached chaits on price tiends in Federal aid highway construction and a corn parison of current and constant highway dollars). V V V The most serious penalty that American society pays for further delays in completing the Interstate System V~S more traffic deaths. The older roads which connect the 3,600 miles of Interstate gaps have twice the fatality rate of com- pleted Interstate routes. V V The Interstate System is not the only feature of our nation's highway prob- V lerns. As Federal Highway Administrator Norbert Tiemann said recently, our roads "are deteriorating at a rate about 50 percent faster than we are able to rebuild or reconstruct them." . V Rural road and bridge needs are of particular concern, since rail, abandon- ments are placing a strain on our rural road network. Agriculture, in particular relies heavily on lugliw ay tiansportation More than one truck in sr~ is on a farm, and trucks haul all hogs to major markets, 99 percent of cattle and calves, 98 percent of sheep and lambs, and 73 percent of fruit and vegetables. V The U.S. Department of Agriculture's Economic Research Service, V~in a recent report Tiansportation in Rural America noted that well over half of the collector mileage in the United States was found (in 1970) to be unpaved or had low type pavement unsuited to continuing heavy truck traffic In this regard, a Gallup Poll commissioned by the Federation indicated that 58 percent of the country's driving age population believes "there is a need for improved roads in rural parts" of their states. V V Approval of S. Res. 69 would also provide additional funds for highway safety activities, including full funding of authorized safety construction prOgrams. These programs, including bridge reconstruction, improvements at high-hazard accident locations and elimination of roadside obstacles, have proven life-saving potential. For example, a Federal Highway Administration study of 634 such projects one year after the improvement found that fatalities were reduced by V V 27 percent, injuries were down 26 percent and total accidents were cut 19 percent. We would also like to call the Committee's attention to the need for complete funding of the state and community (section 402) safety grant program ad- V ministered jointly by the FHWA and National Highway Traffic Safety Administration. V V The fiscal 1976 budget calls for a program ceiling of $108 million for the grant V program-$95 million for basicV grants and $13 million for incentive grants to states which reduce their traffic fatality rates. Authorized funding out of the ~ Hinhway Trust Fund is $204 million, nearly double the proposed ceiling. We are confident that the "402" program is worthwhile, and has produced ~ many positive results. With 18 national standards as guidance, state and local officials have shown that they can turn the seed money of Federal safety dollars into productive, accident reducing programs. In order to carry out these pro- grams, states need the stimulus and commitment from the Federal government ~ that have been reflected by Congress in authorizing acts, but are not reflected in VV~ the 1976 budget proposal. We urge your Committee to give full support to this imnortant prOgram. V Thank you for the opportunity tO express our views. V Sincerely, :~ PETER G. KoLTxow. Attachment. V PAGENO="0109" 103 I `TI ~= PRICETRENDS FOR FEDERAL-AW HIGHWAY CONSTRUCTION isoa * V. 71 AUTHORIZATIONS OF FEDERAL-MD HIGHWAY FUNDS FOR INTERSTATE AND A-B-C-D PROGRAMS 1967-1974, IN CURRENT AND CONSTANT (1967;: DOLLARS ~3~VANT (U 72 74 PAGENO="0110" 104 NATIONAL CRTJSIIED STONE ASSOCIATION, Thashington, D.C., February 25, 1975. Hon. JENNINGS RANbOLPH, Chairman, U.S. Senate, Committee on Public TVorhs, Washington, .D. C. DEAR SENATOR RANDOLPI-I: `The purpose of this letter is to provide you and the members of your Senate' Public Works Committee with background material on the hearings that you have scheduled starting February 27, 1975 on Impounded Federal Aid Highway Funds and on consideration of future Federal Aid High- way Programs. Since the supply of crushed stone construction aggregate iepre- seats one of the largest uses of materials in the highway program and since there is concern about the availability of materials to support an expanded highway program without inflationary, impact, we felt it was our responsibility to provide pertinent information. BACKGROUND Crushed stone is an important mineral resource for the United States and its people. For many years, crushed stone has been used as a construction aggregate material for most public works programs, especially in highway transportation networks. The crushed stone industry produces this important material in mod- ern, safe, and environmentally aware plants, capable of furnishing quality aggregates at an economical price for many construction applications, both public and private. The National Crushed Stone Association (NCSA), a national trade association since 1918, represents those companies which quarry, mine, and process approxi- mately 70 percent of the total national crushed stone production. Historically, the crushed stone industry has experienced a 4 to 4― percent annual growth while maintaining a relatively stable price structure. (Table I illustrates this trend for the period 1967-1975.) While the Federal Aid Highway Program has played and will continue to play a significant role with respect to industry sales, a comparison of Tables I and II lead to the obvious conclusion that the Highway Program is much less a factor of industry sales than it was 8 to 10 years ago. That is, industry production and productive capacity has continued to grow despite sharp reductions in the volume of aggregate required to sustain the Federal Aid Highway Program. SALIENT STATISTICS In order to develop current and accurate information relative to the productive capacity of the crushed stone industry, NCSA conducted a nationwide survey during the period of February 11-21, 1975. The response to that survey from 27 states represented an excellent cross-section of individual company and plant size, from the very smallest to the largest in the Nation. The results reported were remarkably consistent over the range in size and throughout the country. The figures developed represented 42 percent of the total 1974 crushed stone construc- tion aggregate production, that is 314 million tons of the 751 million tons ac- counted for by the 11J.S. Bureau of Mines. Such a sample adds considerable credence to the estimates made below. Miflion Pact: tons TJSBM 1974 reported crushed stone construction aggregate1 751 NCSA survey response 314 Survey coverage, percent of production 42 Projections: Reported 1975 crushed stone construction aggregate, survey com- panies 300 Calculated 1975 crushed stone construction aggregate, total industry__ 715 Potential increased available capacity, survey companies 118 Calculated total industry potential increased available capacity 280 1 Crushed stone construction aggregate Includes base/subbase materials, concrete ag- gregate, bituminous aggregate, macadam `and surface treatment aggregate, etc. PAGENO="0111" 105 SUMMARY While current dollar expenditures for highways have been increasing, rising construction costs and inflation have eroded the volume of construction as measured by aggregate usage per construction dollar. (See Table II and Figure 1). This erosion has been dramatic as can be evidenced by the estimated demand for highway construction aggregates in 1975 (as per FHWA prior to the release of any impounded funds) as compared to the volume used in 1967. The 1975 estimate (prior to consideration of impoundedfunds) will be 47.5 percent below actual 1967. consumption, while total.1975 expenditures will be 34.0 percent above 1967 levels, in current dollars-a considerable erosion of the volume of highway construction per dollar of expenditure. Assuming that the 1975 crushed stone industry projection of 715 million tons of construction aggregates includes that which will be necessary to meet the FHWA projected $11.5 billion highway expenditure, the 280 million tons of available noninflationary additional industry capacity could support an additional $7.5 billion in highway construction. The total, $19.0 billion (11.5 + 7.5), would still be below that required to consume the amount of construction aggregate consumed in 1967. A highway program of $21.7 billion in current 1975 dollars would be required to support such a level. In short, an adequate supply of construction aggregate, without inflationary impact, can be provided by the crushed stone industry to support levels of high- way expenditures considerably in excess of those currently contemplated. CONCLUSION The Department of Transportation and its agencies have the responsibility of providing a biennial transportation needs study. This activity is undertaken in cooperation with the individual states so that the projection will be representative of current needs. It is very apparent that the needs of our Nation's total high- way system, including ABC roads, major arterials, bridges and other structures, have deteriorated to the extent that they are no longer safe or adequate to carry our Nation's citizens, goods, or services. While the interstate system is nearing completion, the unmet needs of these other highway systems require immediate attention. Crushed stone producers share your belief in regard to the effectiveness of public works programs in putting people back to work, as well as to spark other businesses and lines of endeavor. The public benefits additionally through the creation of facilities which have a long term use and add to public convenience and safety. The level of future highway activities is a subject of concern to the Congress. As one of the industries upon which highway and all other construction depends, we want to assure you that our industry has the capacity to produce an addi- tional 280 million tons of crushed stone aggregates during the calendar year 1975, and is in a position to supply the long range needs of Federal Highway and other Public Works programs, at an increased level of funding, without con- tributing to our Nation's current inflation. We stand ready to supply additional information beyond that contained in this letter at the request of yourself, the Committee, or your staff. Cordially, W. L. CARTER, President. PAGENO="0112" 0 C) C 0 0 U) 0 C) 400 C) be be 200 106 Highway Construction Cost Current Dollars C) Cd p4 Cd 4.) C) .9 :~ Cd 0 U) 0 0 12 10 8 iooo - j~_ I I I I I 1967 68 69 70 71 72 73 74 75 Year I ! I 800 Highway Construction Aggregate Usage 600 I I I I I I I f ~ 1967 68 69 70 71 Year 72 73 74 75 FIGURE 1.-Hlghway cost and aggregate usage. PAGENO="0113" 107 TABLE 1.-THE CRUSHED STONE INDUSTRY IN PROFILE (1967-75) Current dollar 1 of Unit stone used value 1 as con- Con- struction of stone Total con- production, aggregate, aggregate struction (tons (tons (dollars aggregate multiplied multiplied multiplied (dollars Calendar year by 1,000) by 1000) by 1,000) per ton) , 1967 783, 581 569, 551 793, 662 1. 39 1968 817, 537 567, 356 825 978 1. 46 1969 861,021 628,929 942 656 1.50 1970 2 867,628 623,952 971 174 1.56 1971 874,497 626,681 1,047,008 1.67 1972 918,933 677,983 1,153,124 1.70 1973 1,058,541 798,287 1,423,752 1.78 19742 2979,000 2751,000 21,400,000 31.86 1975~ 4717,696 NA NA 1 Fob, production site. 2 Estimated ~y the U.S. Bureau of Mines in release `Stone in'1974", Division of Nonmetallic Minerals, Dec. 26, 1974. 3 The 1967 to 1q74 price increase per ton was 33.8 percent compared to an increase of 53.8 percent in the wholesale index for industrial prices during the same period. 4 Based upon aNational Crushed Stone Association survey in February 1975 which indicates 1975 production will be 4.3 percent below that for 1974. TABLE II -ESTIMATED TONNAGE OF AGGREGATE RESULTING FROM THE DOLLARS EXPENDED FOR CONSTRUCTION PUT IN PLACE ON HIGHWAYS AND STREETS 1967-75 1967 1968 1969 , 1970 1971 1972 1973 1974 1975 Highway construction put-in- 8, 591 9, 321 9, 250 9, 981 10, 658 10, 429 10, 559 10, 764 11, 509 place, in current dollars (millions) 1 Price trend for highway con- struction (1967=100) 2 138. 2 152. 4 203. 6 222. 7 Deflation factor (1972-75) 1. 000 0. 90680 0. 67880 0. 62060 Highway construction value in constant dollars (mil- lions) (1972=100) 10, 429 9, 575 7, 307 7, 142 Highway construction usage factors:a' Tons of. aggregate per $1,000 construction, current dollars 95 86 74 74 67 60 Tons of aggregate per $1,000 construction, coestant 1972 dollars 60 60 60 Estimated construction ag- gregate tonnage, (1,000 * tons) 816, 145 801, 606 684, 500 738, 594 714, 086 625, 740 574, 500 438, 420 428, 520 `~ Source: Construction review, table A-2. Forecasts for 1974 and 1975 based ~ipon percentage increases revealed by Fl-I WA release table HF2I (November 1974). 2 Source: Based upon FI-IWA highway construction cost indices, such as FHWA `Price Trends for Federal Aid Highway Construction" whichis released quarterly. 1975 prices arC forecast' conservatively to rise ~.4 percent. 3 Source: FHWA usage factors applicable to Federal aid highway construction. The CITAIRMAN. Before I call on Senator Buckley, I want you to know that I continue to carry my thermometer, `and this room is 68 degrees We only wish the other rooms in the Capitol, including the Senate Office Buildings and the House Office Building, were at 68 degrees I can only" say that I think when it is a little cooler witnesses are in- clued to testify unore.promptly, and even Senators, perhaps, may not take as much time. ` Seriously, `I think we function better if we have a lower tempera- ture. Jim? ` Senator BUCKLEY. Thank you, Mr. Chairman. I notice the lights are on. 50-194-75-----8 PAGENO="0114" 108 Mr. Chairman, I would just like to go into one subject. I am sorry that I couldn't have come here earlier to hear the initial presentation, but I was at another hearing upstairs. I am concerned, Governor Tiemann, about the consequences of the decision that came out in December, from the second circuit court, and I gather from the way you are nodding your head that you are faniiliar with it. My understanding of the consequences is that in effect the court of appeals has held with respect, at least to those States within the juris- dictjon of the second circuit, that the highway environmental impact statements were faulty because they were prepared by the States and not by the Federal Highway Administration. What I want to know is what are you doing about, the court's decision? Mr. . TIEMANN. We are very familiar with the Route 7 case in the second circuit decision. Initially, our regional administrator, indicated to the States that the circuit indicated they could not proceed with projects because of this decision. We are now in process of modifying that, saying that this decision applied only to the projects on Route 7, not specifically to other proj- ects that are in the second circuit, and we will give some degree of leeway as far as proceeding with those other projects. The language is now being developed, and we should have something out to the States within a matter of a very few days. Senator BUCKLEY. It was rumored, as you are probably aware, that this was going to be made a test case to try to get leverage on the Con- gress to change the NEPA requirements, but from what you say, I gather, you will administratively place as narrow a determination as possible on the decision so you may go forward with projects in other areas? Mr. TIEMAN~. Yes, that is right, Senator Buckley. Of course, the other aspect that was commented on is whether or not the Department of Justice is going to appeal this. It is our urgent request that they do. Senator BUCKLEY. But you are not awaiting an appeal in order to Process applications? Mr. TiEM~N. No. Senator BUCKLEY. I am relieved, because on a first come. first served basis, I would hate to see all the recently released highway money disappear. Mr. TIEMANN. Of all the projects in the second circuit that were affected by the decision, most will not be involved in the $2 billion, because they are not ready to go yet. Senator BUCKLEY. But I was afraid the consequences of that de- cision would be applied to other projects which were ready tO go. In the light of that second circuit decision, and while pending the out- come of a possible appeal, is there underway a modification of your approach to the NEPA statements? In other words, a greater in- volvement by FHWA? Mr. TIEMANN. We are involved as much as we can be at the present time. While the States prepare the environmental impact statement, our input is at every level. I don't think we could get `involved any more unless the court's decision is upheld and we are required to do the full preparation alone. PAGENO="0115" 109 Senator BucKr~EY. I would hope that that decision is not sustained. Mr. TIEMANN. If I might, I would ask counsel to make an addi- tional comment. Mr. WELLS. We have had several favorable circuit court decisions indicating that our involvement in preparation is sufficient, and there- fore we wouldn't want, I don't think, to revise our procedures natipn- ally just because of the second circuit. We would like to see that case appealed to the Supreme Court. Mr. CoUPAL. I think it is important to point out that this is not the only aspect of the case concerned. We are also concerned, about having to write one for the whole 280 miles of highway when possibly only 20 miles oi so is involved in the project The CHAIRMAN. Thank you. ` Senator BUCKIiEY. .N:r. Chairman, not having.had the opportunity to hear the testimony, I think that exhausts my questions. Thank you. The CHAIRMAN. Jim, I do want you to know that there are points that have been brought out in the formal testimony and in the col- loquy that have been very provocative and helpful. I want certainly to have the opportunity to ask questions and have replies for the record if you feel you should raise them. Senator BUCKLEY. I appreciate that, and I may avail myself of that. The CHAIRMAN. Senator Domenici? Senator DOMENICI. Just a couple of more questions, Mr. Tiemann, with reference to expediting projects. As I understand it, the procedure you are following on the $2 billion is a rather extraordinary one to take care of what is perceived as a rather extraordinary circumstance. On the other hand, it appears to me that we are going to have rather extraordinary circumstances, even under the most optimistic view, for 3, or 4 years as concerns unemployment figures and recession. We have frequently heard that the process of putting the money to work rather than just obligating it could be greatly expedited if there were not so many categorical limitations imposed upon you. Most of the time we think. of categorical programs as involving social , kinds of programs, but they have grown up in the Highway Act, also. You have said that with reference to the $2 billion, you are urging that they get on with the projects that are expeditious. Might I ask this: Could you give us, not today, necessarily, `but as soon as possible, some detailed recommendations as to how we might help, even if it be only temporary, say for 2 years, or 3 years, by granting you some extraordinary authority to pass along the benefits of pooling of these grant funds or elimination of some of the categorical requirements in the interests of expediting the funding and getting the projects underway? Now, I don't mean that with reference to the interstate.' I think it remains the high priority item. I am talking about some legislative help during this emergency to permit you to do a bit more pooling of categorical grants. I do honestly believe that if the governors had some commitment of the kind we are talking about, as a 2- or 3-year expedi- tious approach to' getting' the money there, they would `be as'happy as in consideration of the moratorium on matching funds. We have been told that if we could pool categorical grant programs, they would take a 10-percent cut. I am not asking for a cut, but that PAGENO="0116" 110 is how serious they are on entanglements and delays. Could you give us some -thought-s on that'? Mr. TIu~rANx. Yes, and I think you will see when we have the 19Th legislative proposal before you that we are recommending reduction of those categories to something like four, or at the most six categories. That, i~ather than temporary relief, would be permanent relief for the States. Senator Do~iExIcI. When will that package be ready? Mr. Tnu~rAxN. It is about ready now within the DOT, and after it goes to 0MB for final approval, and it should be submitted to the Congress ~hdrtly.' Mr. LUTZ. It should be over within a week to -10 days, and we agree with your assertion between the analysis of what. has happened in this accoimt and in the other programs, that that is apt. We now have up to 30 ~r 31 specific allocations in the program. I think it is time to make a permanent reversal of this trend and get it down to interstate, rural, urban and safety-four broad categories within which the Gov- ernors have a great deal of - latitude to put the funds to work both expeditiously and On their highest priorities. We wi~l recommend to you, say, within the next 10 days, that we ought to get the individual categories from 3-1 to 4, and let's get on with it ii~ terms of simplification. Senator Do~iENIcr. Let me ask you a quest-ion on this regarding the 31 categories. Your proposals address themselves also to the highway trust fund' ~i~d the whole gamut of problems. Mr. LUTZ. That would have to be a separate bill, of course. Senator D0MENICT. We are talking about this being a separate approach to the categorical grant dilemma that you say exists. Mr. `LUTZ.' -Yes. The Congress will have to deal with a `separate bill that basically differentiate between program structure a-nd revenues. Senator' DOMENICI. Thank you very much. I have no further ques- tions Mr. Chairman. - The CHA~MAN. Thank you, Senator Domenici. This has been, I think, a good morning of testimony a-nd colloquy, and we appreciate your coining, Governor Tiemann, and you, Mr. Lutz, -Mr.' Lamm, Mr. Coupal, and Mr. `Wells, for your statements and for your: response to questions.' We view the further development of our road systems as important in the strengthening of the economy. That would be said by me even if we were -not in a period of recession, but certainly this is an added reason for' developing highways to better serve the* people- of the United States. I reiterate what I have said in the past, and that is that' the strength of our economy is geared upon wheels and wings, the mobility of our people, the `movement of the products from the farm' a-nd the factory to the ultimate consumers. - Highways are an important part of- the network of transportation. But otir-čountry's railroads also are essential parts of the system. I am very -concerned with the condition of the rail beds. I have been- doing what I can on the solution of that problem. We are movino coal - at a very slow rate over certain segments of rail lines becaus~e the maintenance- of the rails and the rail beds has deteriorated during recent years-. - - - - - PAGENO="0117" 111 I think there is even some fear by those who are riding.Amtrak, who move between Washington and New York, that they are reducing their travel because they feel that the roadbeds are not able to take the speed of. the trains that are now operating. I `im not trying to be an alarmist in this field, but I do know th'~t people are thinking about safety as they tiavel, and people aie con ceined about the mo~ ement of products by iaii We thank the witness. We also thank those who sat withus this morning. . Mi TIEMANN May I m~ke an ~tdditional comment ~ Ea het in the heaung, Senatoi Bentsen asked `tbout the completion of the Inter state, and I. gave him two answers. Both were correct, but let me ci ii ify it With regai d to the percentage of inflation, the inflation ąactoi, if we use the zero inflation factoi at `~ $1 billion annual level, we complete the Interstate in about 1985. If we use 7. percent ~is a factor, about1990. ; . . .. . . Ihe CHAIRMAN When the Interstate System was cieated in 1956, n h'tt was the estimate of the completion date ~ Mi TIEMANN 1972 The CHAIRMAN. Would you say that there have been several:reasons why we haven't been able to do it, but one stands perhaps ~bove all othei s, and that is the inflation'u y increase Mi TILMANN No question The CHAIRMAN. I do feel that has been the major problem. There have been other factors; and we recognize that. .;. We might have you place~ in the recOrd the situation percentagewise of competitiQn of the Interstate, State by State. Could you do that? Mi TIEM~'NN Yes [The information requested follows:] . . . . .. STATUS OF COMPLETION OF THE INTERSTATE SYSTEM (AS OF DEC. 31, 1974) Percent of total miles Percent of open to State traffic' total cost obligated2 State Percent of total miles Percent of open to total cost traffic' obligated~ Alabama Arizona Arkansas California Colorado Connecticut Delaware Florida Georgia Idaho 1 Ilinois Indiana Iowa Kansas Kentucky Louisiana Maine Maryland Massachusetts Michigan Minnesota Mississippi Missouri Montana Nebraska Nevada 78.5 65.7 87.4 51.1 96.6 72.6 91.6 79.8 84.5 53.2 80.1 43.6 71.8 86.2 74.4 69.5 79.6 62.3 90.6 74.6 83.9 66.8 90.8 86.3 85.2 76.0 95.2 61.4 83.8 67.7 68.4 59.4 93.6 77.0 91.3 41.3 93.1 74.8 87.8 73.7 75.7 61.9 91.5 75.1 86.2 75.3 80.5 69.1 94.2 93.0 84.3 71.2 New Hampshire . . 90.0 60.9 Newiersey . 77,5 62.7 New Mexico 93.0 71.9 New York 88. 8 65. 0 North Carolina 73.5 53. 6 North Dakota 91. 6 90. 7 Ohio 92.1 . 78.4 Oklahoma 96.4 . 81.3 Oregon 94.7 55.6 Pennsylvania 91. 3 71. 2 Rhode Island 69. 0 57. 1 South Carolina 83.7 74.4 South Dakota 83.6 83. 5 Tennessee 81. 5 74. 5 Texas 85.2 71.1 Utah 69.8 68.2 Vermont 89.0 79.9 Virginia 79.1 . 58.0 Washington 81. 2 58. 4 West Virginia 82.5 68.7 Wisconsin 81.8 64.9 Wyoming 86.7 77.5 Districtof Columbia 41.2 26.7 Hawaii 42.9 48.2 Total 85.3 66.4 1 Includes toll facilities on the interstate system. 2 Based on tho 1975 interstate cost estimate total cost of the system. PAGENO="0118" 112 [Additional questions follow:] Question 1. With regard to your FY 1976 budget request, could you describe briefly the policy framework from which your program emphasis was developed? The Federal budget process is designed to develop a fiscal plan that makes maximum use of limited financial resources in terms of programs which Execu- tive leadership determines are of greatest national concern. This plan must be responsive to national economic policies, and aid in achieving the desired objec- tives for balance and growth. It is basically a process of synthesis and analysis. Many diverse and important programs, each with its advocate, must compete for the limited Federal resources. In geneial, the President establishes a total level for the budget l)ased on expected revenues and his economic policies. This, in turn, is subdivided among the various departments and agencies which are given target ceilings. The departments,, meanwhile, have requested budget estimates from their constituent agencies and bureaus. The estimates include costs of program continuation; mandatory and uncontrollable costs; and costs for new starts, program expan- sion, or realignment. The Department aggregates these estimates and compares the total to its target which invariably is exceeded. A Secretarial review is conducted, priorities established and applied, appropriate program emphasis determined, and an allowance is made within which each agency develops a detailed budget request to be sent to 0MB. At 0MB the process repeats itself. Priorities are considered as are the present state of the economy, changes in objectives and goals, the current international political situation, and other elements important to the national fiscal plan. The final result is the President's budget. Each decision-point in its evolution has attempted to consider what should be done, when, and in what amount. With the passage of time, circumstances change. Thus, the budget as sub- mitted may later be modified. (This has recently been exemplified by the release of $2 billion for Federal-aid highways over the level originally proposed for FY 197~.) With enactment of the' "Congressional Budget and Impoundment Control Act of 1974," the Congress has now disciplined itself to review the same economic realities as the Executive has addressed. In short, both branches of government wish to achieve the same goal-constituency satisfaction and national economic balance. `Question 2. How- did you allocate expenditures among the various programs? Available, contract authority for all Federal-aid Highway programs are either apportioned to the States utilizing a statutory formula or allocated to States utilizing other specific criteria. Utilization of the available resources by each individual State is determined within thO framework of priorities established by that State. Therefore, the allo- cation of xesources among various programs as displayed in our budget is merely an estimate' of how the States will utilize their available resources in the current and budgetyears. ` " Question 3. It would be helpful to the Committee if you could describe your budget submission to the Secretary of Transportation and his submission to 0MB. PAGENO="0119" 113 DEPARTMENT OF TRANSPORTATION, FEDERAL HIGHWAY ADMINISTRATION SUMMARY OF FISCAL YEAR 1976 BUDGET REQUESTS AND ALLOWANCES [In thousands of dollarsj Fiscal year Program levels 1975 OST request 0MB request (OST allowance) Congressional request (0MB allowance) Grant programs: Federal-aid highways $4, 600 0 Off-system roads 1: 0 Highway beautification 45.0 Highway-related safety grants 14. 7 Rail crossings-Demonstration projects 11 9 Railroad-highway crossings demonstration projects.... 4. 8 Rural public transportation demonstration program_ 9. 6 Territorial highways 4. 6 Darien Gaphighway 10.3 National scenic and recreational highway 0 Overseas highway' 0 Other programs: Alaska highway 4. 8 Right-of-way revolving fund 45.0 Baltimore-Washington Parkway 1- 5 Highway safety research and development 8. 7 Motor carrier safety 6. 1 General operating expenses (136. 8) Othertrustfunds 38.8 Miscellaneous accounts 2. 1 Salaries and expenses 2. 5 Total 4 810.4 Outlays 4,670.0 Positions 5, 065. 0 End-of-year employment 4, 786. 0 $6, 357. 5 200. 0 61.0 34. 5 16. 1 26. 7 a 60.0 10. 0 46.5 20. 0 415.0 12. 0 32.0 4. 0 10. 0 6. 6 (155. 5) 62.7 0 0 $5, 346. 5 2 0 560 15. 0 16. 1 5. 0 20.4 5 5 45.3 0 0 12.0 32.0 2. 5 10.0 6. 8 (153. 3) 54.0 0 0 $5, 200.0 2 0 56.0 15. 0 15.0 1. 4 20. 4 4. 6 14.2 0 0 8. 0 15.0 2. 5 9. 2 6. 8 (147. 3) 45.1 0 0 6,974.6 5,351.0 5 627.1 5,080.0 5 413.2 5,020.0 5, 070, 0 4, 896.0 5, 070.0 4, 896. 0 5, 035.0 4, 855. 0 `Authorized by Federal-Aid Highway Amendments of 1974. 2 A liquidating cash appropriation of $10,000,000 was allowed to cover possible use of this program by the States. Any obligations incurred under this program will be against the user State's regular Federal-aid obligational limitation. 3 $20,350,000 was requested in regular OST budget submission. This amount was allowed. Following passage of 1974 Amendments Act, an increase to $60,000,000 based upon the new authorization was requested but denied. P fiscal year 1975 supplemental for $5,350,000 was also requested but denied. This proposal would have increased the fiscal year 1975 program level to $15,000,000, the same as the new authorization contained in the 1974 Amendments Act. 4 A fiscal year 1975 supplemental of $10,000,000 was requested but denied by OST. Question 4. What process was used to arrive at your budget request for the "Transitional Quarter" (July 1, 1976-September 30, 1976) to the new fiscal year? FHWA estimates for the three-month transition period generally equal one- fourth or less of the F.Y. 1976 estimates. 0MB instructions directed that budget requests for the transition period should only provide for the continuation of programs from F.Y. 1976. New program starts were to be deferred until F.Y. 1977. Therefore, FHWA fis-st established program levels which were equivalent to one- fourth or less of the F.Y. 1976 levels: Appropriation requests for new obligational authorities and liquidating cash were then developed based upon the transition period program levels. In effect, the estimates for the transition period are simi- lar to a continuing resolution. Question 5. What are the long-range policies of FHWA to meet the changing transportation needs of this country? What type of framework has been estab- lished in which to develop such policies? What would be the expected costs of such long range policies? The Department of Transportation recognizes that the need to conserve our remaining supplies of energy related raw materials will be a top national priority for many years. In this respect DOT policy is to reduce our dependence on the private automobile, especially in urban areas, by improving public transportation service as well as to improve the efficiency of the private auto through car- pooling and more fuel-efficient engines. The Department and FHWA also see a shift in long term policy away from programs which stimulate the construction of new highway facilities and toward programs which will emphasize improved management and use of existing roads and its upgrading of these existing roads. PAGENO="0120" 114 F.dorai h!gluvay programs in th~ future will focus on providing a direct Federal rle in a limited system 01 l~i~hways recognized as essential for connectivity tlu'onghout the Nation. Below t1ii~ national system of roads the Federal role should lie more supportive of State and local transportation programs by reducing the 30 plus categorical programs to more manageable, flexible assistance programs. Continuing and expanding the off-system eligibility authorized by the 1074 High- way Amendments is a good example of this program direction. The. CirA1R~rxx. The next hearing of our committee wifll)e in the continuinfi' review of the A~encv biid~et requests. That hearing will be. held on Monday. March 0. 19Th. he~mmn~' at. 10 n.m.. and at that time w C I ill t I.K( U]) 1. 1 U I iinpoi ini P ~ of flii~ I\ hol( ~1( 11.1] ( nd h IL is the report from the Environmental Protectjon A~enev. The hearing will, of course, be held in this room. Thank iou. [Whereupon, at 11 :~5 a.m.. the committee recessed, to reconvene on Mondnv, Marc].1 3, 1. at 10 n.m.] PAGENO="0121" BUDGET REVIEW ENVIRONMENTAL PROTECTION AGENCY V MONDAY, MARCH 3, 1975 V V U.S. SENATE, V V V CoMMITTEE ON PUBLIC WoRKs, V V V Washington, D.C. The committee met at 10 a.m., pursuant to call, in room 4200, DlrksenV Senate Office Building, Hon. Jennings Randolph (chairman of the committee) presidmg. Present: Senators Randolph, Muskie, Gravel, Morgan, Hart, Baker, Buckley, Stafford, McClure, and Domenici. OPENING STATEMENT OP HON. EDMUND S. MUSKIE, U.S. SENATOR V V V V V PROM THE STATE OP MAINE V V Senator ~VV1USKIE [presidingi. The committee will be in order. V We have a lot to do this morning and we ought to get started. 1 may have to leave. I know I will have to leave in the course of the hearing to testify on my own committee budget before another com- mittee. So, we hope that there will be other members of the com- mittee present to continue the hearing until we have completed it this morning. V V V J have al longer opening statement than usual, but I will Vread be- cause it raises a number of issues which we will be probing. This hearing marks our third annual review of EPA~S budget. This re'~~iew has familiarized us with the details of EPA~s VV resource needs and has provided information useful in discussing these needs with the Senate Appropriations Committee. V V This Vyear there is a new perspective to this hearing. Congress has created a new budgetary process, and standing committees will be submitting their analyses of program needs to the Budget COmmittee. A report from the V Public Works Committee to the Sena~e Budget Committee will be made by March 15 outlining budget recommenda- tions. Last year in these hearings, I asked Administrator Train if his Agency ever submitted a budget to 0MB. based only on the evalua- tion of the requirements of the law and the resources needed to im- plement those requirements. His response was this: "No, sir, we do Vnot submit budget recom- mendations along those lines, what 3TOU might call an optimum budget." As I said a month ago in our hearing on water pollution (115) PAGENO="0122" 116 construction funds, we hope to explore this kind of budget with you today. The new budgetary process can aid Congress in analyzing the real needs of the Agency. Previous discussions have been constrained by the fact that the executive branch imposes arbitary budgetary ceilings on such discussions. The work of the Budget Committee has already produced some useful information. The period from 1965 to 1975 would be regarded by most of us as one of growing environmental awareness, greatly expanded environmental programs, and increased commitments to the protection of the environment. Yet, as a percentage of the Federal budget, a measurement which has been popularized by the Defense Department, funding of environmental programs has not changed at all. In 1965, natural resources and environment received 2.5 percent of the Federal budget. That percentage is unchanged for 1975. Budget- ary commitments have not matched rhetoric or the new programs. Perspective must be regained. We are spending billions of dollars for cleanup, based on information from insufficient thousand dollar monitoring projects. Last year in these hearings, the General Accounting Office reported that funding of water pollution R. & D. programs in EPA was declining at the same time that a major commitment to an enlarged construction program had been made. The imbalance is obvious. Another measure is the expenditures analysis of the last 5 years. When inflation is deducted from EPA's budgets, we find that in 2 of the last 5 years, the programs have declined in constant dollars. The other 3 years have shown useful increases, but the analysis indicates that we have not been on a steady escalator for environmental pro- grams. We have ridden an up and down funding cycle not geared to new laws. Recent budgets illustrate the problems environmental programs have faced. Congress added 420 new positions and $203 million to EPA's programs in the fiscal year 1975 appropriations bill. That bill was vetoed by President Nixon. These positions were for EPA's nonenergy programs. let, while Congress was expressing its will on the subject, the Agency was receiving its target for the next fiscal year, fiscal year 1976, which is the budget we are now examining. lncrediblč as this may seem, EPA was being asked to cut its non- energy programs $2.2 million below the President's fiscal year 1975 request. This would have been $205 million below the congressional level established at that time. On top of this, the Agency was being asked to drop 150 of its personnel positions. With these cutbacks, 0MB should have asked for a repeal of all or portions of EPA's statutory responsibilities. These cutbacks would have nullified substantial parts of those acts and that fact should have been acknowledged. Restoration of OMB's proposed reductions required the year-long efforts of the Administrator of the Environmental Protection Agency. But that kind of holding battle does not allow the analysis we hope to engage in tod ay. Instead, it forces a struggle for survival. PAGENO="0123" 117 ~\Te hope that the task today is more pleasant. We would like to examine the priorities that ought to be established, not just levels that allow for survival. One of the most crucial needs of the Environmental Protection Agency is increased personnel. Enforcement programs require people. Research and development programs require scientists. If someone is not checking the monitors, then abatement actions are likely to slip. These personnel needs are becoming more and more critical. rrhe Supreme Court has ruled against the impoundment of water pollution funds. We are finding that releasing the impoundment money is not enough. We must require the administration to release the im- pounded personnel levels as well. Congress provides increased person- nel authorization in its appropriations, but the administration refuses to allow agencies to hire those people. The administration proposed the Safe Drinking Water Act, which is now law, has proposed toxic substances legislation, Clean Air Act amendments, and may propose water pollution amendments. All of these will make substantial new demands on the Agency. Many are designed to involve a great deal of administrative discre- tion, which requires manpower to conduct. studies, make judgments, and issue case-by-case orders. Y et the administration does not propose or make available the manpower to manage existing programs. The Senate report accompanying the 1970 Clean Air Act pointed out that money and manpower for clean air programs were. running at half the authorized levels, it went on to say the following: This pattern cannot continue if the Congress and the Federal Government are to retain credibility with the American people. The authorizalion figures contained in the bill represent the best estimate of the committee in consultation with the Administration of what would he required to implement the provisions. The availability of manpower, with adequate funding, can provide effective implementation of this Act. The committee expects the past trends be reversed and that required manpower be made available to implement the program. Regarding the manpower problem, the committee has received a statement from Dr. Dade Moeller, discussing air pollution manpower training problems. Dr. Moeller is chairman of the National Air Pollution Manpower Development Advisory Committee which was established under section 117 of the Clean Air Act. His testimony highlights the fact that manpower problems are becoming a very significant restraint on environmental progress. We will include this statement in our hearing record. [The statement of Dr. Dade Moeller appears at p. 203.] Senator MUSKIE. The long-term budgetary needs of EPA are of concern to this committee. We realize that we must look 2 or 3 years ahead to have substantial influence on the budget. In this respect it is disturbing to read in the January 31 letter from 0MB Director Roy Ash, to Russell Train, that EPA will be asked to reduce its next year's budget by $7 million. More overwhelming to the statement in that same letter is that the Agency will be asked to reduce its 1978 budget by $52 million from the present budget before us and in fiscal year 1979 and fiscal year 1980 reductions of $62 million below the present level will be proposed. PAGENO="0124" 118 The fact that the fiscal year 1976 request is the peak funding proposed by the Office of Management and Budget for environmental protection programs for the next 5 years is disturbing. In their view, we hav~e hit the top, and from here on it will he downhill. The tecord does not support such cuts and I do not believe that Congress will tolerate it. Instead, we will he looking to the resources needed to further environmental programs. That is the task that we had in mind when we requested EPA to testify this morning and I look forward to hearing Mr. Train's testimony. May I say, in addition, that I appreciate the cooperation we have had from EPA operating, I understand, within the constraints of its role as a part of the administration to give us the infOrmation we need to analyze the personnel requirements of EPA, of the programs which you have been mandated to manage as well as the new propsals that we are asked to consider. All of these new laws require people. As we move forward from the policymaking stage to the policy implementation stage, which means enforcement, jR. & D., and all of the rest, the manpower requirements are going to grow. I thinkthat is as clear as clear can be. We appreciate the coopera- tion we have had from EPA undertaking to identify those needs. Senator Baker, would you like to comment at this pomt? OPENING STATEMENT OF HON. HOWARD H. BAKER, JR.; U.S. SENATOR PROM THE STATE OF TENNESSEE Senator BAKER. Mi~. Chairman, thank you very much. I have only thisto say: that as Mr. Train understands, and this committee is keenly aware, we have a unique situation here. We have our first effort in. the identification of the budgetary processes under the new act in the presence of the new chairman of that committee. I will follow with great interest how we juggle both of those halls at the same time. I am happy to have you here. This is an Agency that has been, I think, an~ outstanding example. of governmental activity that has brought about an appropriate improvement. The continuing question of how much it costs, of what the funding levels. may be is something~ that I look forward to. hearing from you on. . Senator MuslIE. I think the way you juggle it, Howard, is in the words of &nator Hollings' definition of the Congress, the two-armed Congress~. I will have to have two arms to manage these. One on the one hand, and one on the other hand. Senator BAKER. You are about as good as any other hand I have seen. Senator MIJSKIE. Senator Morgan? Senator Hart? I will have to go testify on my own budget in another subcommittee during the course of this hearing. I hope we can maintain some continuity of the membership on the committee. PAGENO="0125" 119 STATEMENT OF HON. RUSSELL E. TRAIN, ADMINISTR4TOR,. ENVI- RONMENTAL PROTECTION AGENCY, ACCOMPANIED BY AL ALM, ASSISTANT ADMINISTRATOR FOR PLANNING, JAMES AGEE, AS- SISTANT ADMINISTRATOR FOR WATER AND HAZARDOUS MATE- RIALS, ROGER STRELOW, ASSISTANT ADMINISTRATOR FOR AIR AND WASTE MANAGEMENT, WILSON TALLEY, ASSISTANT ADMIN- ISTRATOR FOR RESEARCH AND DEVELOPMENT, RICHARD JOHN- SON, ACTING ASSISTANT ADMINISTRATOR FOR ENFORCEMENT, RICHARD REDENIUS, DEPUTY ASSISTANT ADMINISTRATOR FOR RESOURCES MANAGEMENT, ROBERT ZENER, GENERAL COUNSEL OF EPA, AND JACK *RHETT, DEPUTY ASSISTANT ADMINISTRATOR Mr. TRAIN. Mr. Chairman, members of the committee, I ~velcome the opportunity to be here today to discuss our budget p1~tus for the coming fiscal year. I think I should identify the other people at the table with me. We have a fairly full display of EPA top management here because I think when we do get into the budget, both from the authorizing standpoint and also from the appropriations standpoint, all the top people right across the board should be made available to you. On my right, Mr. Al Alm, Assistant Administrator for Planning. On his right, Mr. James Agee, Assistant Administrator for Water and Hazardous Materials. On my left, Mr. Roger Strelow, Assistant Administrator for Air and Waste Management. On his left, Dr. Wilson Talley, Assistant Administrator for Research and Development. On his left, Richard Johnson, Acting Assistant Administrator for Enforcement. Then we have behind us a second rank, although really no less important, and I would name particularly Dick Redenius, who is the Deputy Assistant Administrator for Resources Management, with very particular responsibility for development of the Agency budget. I think that is very important from your standpoint here. Just to my left, Robert Zener, the new general counsel of the Agency. I am not sure you have met him as general counsel, a new independent office in the Agency responsible directly to the Administrator. Of course, Jack Rhett, our Deputy Assistant Administrator, with particular responsibilities for the construction grants program. I should make one other remark in the interest of any of those in the audience who may be here, hoping to hear my announcement on the decision of the automobile emissions suspension issue. I do not plan to say anything further about it this morning. It is my expectation to announce the decision on Wednesday afternoon. Senator BAKER. Mr. Chairman, if you would permit me to interrupt, that reminds me a little of the justice of the peace in ScOtt County, Tenn., who heard an extended lawsuit with extensive legal counsel. When it was over, he said, "Gentleman, I will take this case under advisement until next Tuesday, at which time I will rule in favor of the plaintiff." Mr. TRAIN. This committee-to proceed, Mr. Chairman-T--has contributed significantly to the design of the Environmental Protec- PAGENO="0126" 120 tion Agency's programs. rfherefore I think it is both timely and important that your committee review EPA's resources this year. Before getting into the details of our 1976 program, I would like to briefly address the process and the year-round analysis that was undertaken to develop the Agency's budget. The formulation o' a budget is a difficult procedure in the best circumstances. Rarely do program budget needs correlate with the fiscal realities. This year with the acute and closely relate4 environ- mental, energy, and economic problems, it was particularl~- difficul t. Last spring, to begin the 1976 budget process, we developed esti- mates of our resource needs, and discussed them in some detail with the Office of Management and Budget. That was last May, approxi- mately. These resource requirements were unconstrained by fiscal policy. In other words, we were at that time, Mr. Chairman, discussing perhaps for: the first time, I am not sure of past history, with 0MB what.[ think you would describe as an optimum budget from the stand- point of the Agency. We thoughtit important to develop total Agency needs and make them and their supporting rationale available to 0MB. We also initiated an intensive internal review of major policy issues. The rigourous internal analysis undertaken by EPA resulted in a very substantial reallocation of resources. For e~ample, to meet high priority needs, EPA proposes to real-S locate 451 positions to higher priority activities. While theserealloca- tions are painful, they will provide us the ability to achieve our highest national priorities. In addition to providing an analysis of EPA policy, this process provided a basis for our 1976 budget request to 0MB and the essential framework for the budget you have before you today. As a result of a long process, including a session with the President, I believe the budget we are presenting represents a balance among our important environmental objectives and other vital national concerns. Clearly with the overall budget constraints, EPA cannot achieve everything that Congress envisaged. However, by judicious use of resources, I think we can achieve major statutory objectives that will bring about a high quality environment. We believe the difficult choices we made are the right ones and welcome this opportunity to discuss them with this conimittee. I would nOw like to highlight some of the more significant develop- ments and priority adjustments which are reflected in our budget request. These budget proposals serve to emphasize the increasing impor- tance of our working relationships with State and local governments. As our programs have matured, individual States have assumed increased responsibility for their effective implementation. We will continue to depend on the States to share our workload. The budget also reflects our policy of shifting EPA personnel from headquarters to the field whenever possible. Let me now turn to the major program proposals. To highlight, we will concentrate resource increases in high priority areas such as air enforcement, construction grants, water supply, and pesticides. PAGENO="0127" 121 In 1976 we will be confronted withsignificant challenges in imple- menting the Clean Air Act. `We plan to have 85 percent of the major stationary sources in compliance with SIP emission limitations or compliance schedules by the end of this fiscal year. We will, however, experience major challenges in achieving health related standards in problem air quality control regions. We have learned a great deal about the adverse effects on health caused by pollution, but realize there is much more which we must learn. We will continue the air pollution research and development efforts to strengthen our knowledge of health effects on which to base air quality criteria. We also plan to continue study of the potential health impact of catalytic converter related emissions, especially sulfate emissions. In addition, we will be increasing our knowledge of the health and ecological effects of synergistic combinations of air pollutants such as ozone and nitrogen oxides. Research on long-range transport of these pollutants will also be carried out. The Clean Air Act relies on the achievement of primary and sec- ondary national ambient air quality standards through the mechanism of State implementation plans. We are encouraging maximum partici- pation of State and local agencies in the implementation of a number of programs, including increased enforcement of State plans, the development of vehicle inspection and maintenance programs, and air quality maintenance programs. We realize, however, that State fiscal constraints will to some degree hinder their ability to adequately implement these programs. ~\Te plan to step up the federally operated mobile source pollution control programs. To augment the vehicle certification program, we plan to implement a program to determine whether production vehicles conform to the standards. This will include a Mobile Enforcement Test System to check and augment assembly line testing done by the manufacturers. We will add to the certification program the ability to certify vehicles operated at high altitudes and we will also implement a voluntary self-certifica- tion program for certain emission related aftermarket parts. This will alleviate the potentially anticompetitive impact of the recall and warranty provisions on the aftermarket parts industry. Our air program budget for State control agency support will remain at the $51 million level in both 1975 and 1976. While the new obli- gational authority shows a reduced level of funding, this level will be augmented by funds deferred from 1975. Completion of the capital intensive equipment procurement and construction phases of several large-scale SOx demonstration projects has allowed us to reduce the funding for our nonenergy related control technology research program by $8 million. The Federal Water Pollution Control Act Amendments of 1972 represent an extraordinarily complex a.nd far-reaching piece of legis- lation. Striving toward the ambitious goals set forth in the act requires the combined efforts of Federal, State and local governments as well as other interested organizations. The water pollution control program remains a top Agency priority and is an area within which we were able to accomplish major repro- PAGENO="0128" 122 grarning. While the program appears to have increased, the.levei of funding. actually represents a modest reduction from last year's budget. The apparent increase is the result of a. change froni contract authority for section 208 a.rea.wide planning in 1975 to budget author- ity in 1976. . While we intend to maintain a nearly consta.nt level of effort in our water pollution control programs, we propose to alter program emphases and significantly reprogram resources to reflect changing priorities. We are nearing completion of the initial issuance of National Pollutant Discharge Elimination System permits, and we expect to have delegated the program to about 30 States by the end. .of fiscal year 1975. . I am especially pleased to note that 94 percent of all major indus- trial discharge permits and 86 percent of the major municipal permits have been issued. And more significantly, I think, all major dis- charger-6,300-----permits will have been issued by the end of fiscal year 1975. The shifting program emphasis from permit issuance to compliance monitoring and enforcement has allowed us to reallocate $2.8 million and 146 positions out of this program. In our construction grants program, we expect to see a substantial increase in workload from 4,300 active projects last fiscal year t.o over 8,500 active projects in fiscal year 1976. To meet this demand, we propose to increase staffing through reprograming of 161 positions and $2.9 million. We have already reprogra.med 54 positions. We expect, however, that this increase will not he sufficient to meet workload demands and, therefore, we are depending on significantly increasing the delegation of program responsibilities to the States. Consequently, we have under consideration an amendment which will increase the role of local and State governments in the manage- ment of the construction grants program. Other amendments aimed at increasing the effectiveness of the construction grants program are also under consideration. The President's budget reflects the obligation of $4.2 billion in construction grant funds this fiscal year and $5.2 billion in fiscal year 1976. With the release of the $5 billion reserved funds pursuant to the Supreme Court ruling, we expect obligations to increase by an addi- tional $400 million in fiscal year 1976. We expect that nearly all of the $18 billion authorized by Public Law 92-500 can be obligated by the end of fiscal year 1977. The recent release of the reserve funds will be more than enough to cover all projects which are currently ready to go to construction- including those which were previously too low on State priority lists to be eligible for Federal funding. . We estimate that over $4 billion in construction activity can be initiated between now and the end of the calendar year and that direct on-site employment related to these projects will exceed 80,000 with at least an equal amount in off-site employment. Let me add a brief word here. I am sure the committee will want to discuss this program in more detail later. I think we have made some substantial progress in expediting the obligation of funds and their movement into construction under this program. PAGENO="0129" 123 But having said that, I will say that I am far from satisfied at the rate at which this is moving. We have been working hard within the Agency to identify the internal need for improved management which will assist this progress. And I think we have succeeded in identifying a number of these areas. Likewise, there are going to be some places where we are going to need some help, both from 0MB and from the Congress. We have. identified these areas. I just want to mention this in passing. As I say, we can get into this and doubtless will in more detail. But I do want the committee to be fully aware that while I do believe we have made substantial progress in speeding up these funds that we have got a long way to go. It is my determination that we go that further distance not only from the standpoint of expen diting the achievement of environmental goals, but also and in a complimentary sense to expedite the attain- ment of the economic goals which we all have in n'iind. I see these two goals coming together as I suspect they very often will and should. To achieve `this result will however require the very highest kind of priority on my part and the Agency's. I simply want `to as~ure you that the program will be getting that attention. We are continuing our policy in fiscal year 1976 to maximize the. involvement of the States in implementing the Federal Water Pollu- tion Control Act. In this respect we plan to continue the level of grant support to State control agencies. Support to the States in fiscal year 1976 will be maintained at a $40 niillion funding level, in part through `the use of funds deferred in fiscal year 1975. The water quality research and development program will concen-. trate in fiscal year 1976 on determining the potential health effects of laud disposal of effluent and `sludge produced by waste water `treatment. Programs focusing' on the environmental effects of ocean dumping of municipal wastes, the management of such nonpoint sources of water pollution as animal feedlots, and the development of improved systems to utilize and dispose of waste water sludges will also be funded. We are requesting an increase of $3.5 million in this program over 1975. Because of the 1975 Congressional add-on of $5 million, the budget reflects a decrease of $1.5 million for the water quality research `effort. With respect to section 208 areawide planning, we are proposing `funding at the $53 million level in 1976. This will provide support to an additional 66 areas. The funds will provide these areas with a means of comprehensively addressing both point and nonpoint water pollution problems within their geographic boundaries. Section 208 area wide planning, which was provided as contract authority in 1975, will he carried as budget authority in 1976. One of our most significant program developments in 1976 will be implementation of the recently enacted Safe Drinking Water Act which provides for the protection of drinking water supplies throughout the United States. We have been anticipating the passage of this measure, and we are moving toward the establishment of national drinking water regula- `tions which specify the standards required to protect the public health. PAGENO="0130" 124 We will also provide the mechanism by which States may insure compliance with the primary drinking water regulations, the minimum requirements relating to underground injection of fluids, and the pro- tection of groundwater sources. In 1976, we will increase resources allocated to development of drinking water and underground injection regulations by $6.8 million. A $10-million-grant program will be initiated to help the Sta.te~ in developing and implementing their drinking water programs includ- ing underground injection control. In addition, water supply research and development will he in- creased by $7.6 million. These funds will support increased research on the health implications of suspected contaminants, allow initiation of studies of their impact on groundwater supplies, and permit expan- sion of the control technology program. The solid waste budget reflects a $3.9 million decrease due to th~ $5 million added by the Congress for research and development in 1975 that we did not include in our budget this year. Additional resources in the hazardous waste management program. will allow us to define the types of hazardous materials whose disposal presents the most severe problems to identify potential health effects,. and to assess various approaches to control hazardous waste pollution.. This data will be used to develop guidelines for the disposal, storage,. treatment a.nd transport of hazardous wastes. The Federal Insecticide, Fungicide, and Rodenticide Act. requires~ t.hat all presently registered products (about 34,000 Federal an~L 15,000 State) be reregistered and classified for "general" or "restricted" use b October 21, 1976, and that by this da.te all applicators of "restricted use" pesticides be certified by the Sta.tes. The $10.2 million increase which we have proposed for our pesti-~ cides program will aid the States in the development a.nd implemen-~ tation of their applicator certification and training programs. In this effort we will be cooperating with the USDA Extension Service to utilize their existing resources as much as possible to. establish a.nd conduct tra.ining courses. We estimate that over 2 million private and 100.000 commercial applicators may require certification, and many, perhaps most., will require some precertification training. The increase will also provide for some additional funding to assist in processing the reregistration and classification workload. For our noise program, we are asking for an increase of $4.7 million to step up the development of new product noise emission standards. and labeling regulations. We intend to publish very shortly a second listing of major n.oise sources which should include 4 to 6 products. Additional products will be named in subsequent lists during 1976.. The requested funds will allow us to conduct technical studies neces- sary to provide information to per~nit us to proceed with standard setting on the listed products. We also have action under way which should lead to labeling of devices for hearing protection in 1976. We intend to expand our labeling effort to include additional noise control devices. The EPA Energy H. & ID. program is an important part of the over- all Federa.l effort to achieve grea.ter energy self-sufficiency. The under- lying thrust of the program is to provide adequate environmental PAGENO="0131" 125 protection as the nation moves toward expanded use of domestic fuels. Particular emphasis will be placed on environmental problems associated with the following major areas: -The extraction of coal, oil shale, oil, and natural gas and the reuse or proper disposal of wastes resulting from their extrac- tion and processing; -Fossile fuel combustion; -Production and use of synthetic fuels; and -Advanced energy systems and conservation~ With a total funding in 1975 and 1976 of $246 million, the energy program constitutes one of the Agency's major efforts. In 1976 we expect to fund three interrelated energy activities: -A processes and effects program to determine the environmental effects associated with energy extraction, transmission conver- sion and end use; -A control technology program to identify, develop and demoii.- strate necessary pollution control techniques; and -A policy and implementation program to evaluate the environ- mental, economic and social consequences of alternative strate- gies for pollution control of energy systems. We also are requesting an increase of $2 million for the operation of an inhalation toxicology facility at the National Center for Toxi- cological Research. This facility will permit studies of the health effects of chronic exposure to low levels of air pollutants. We are requesting $6 million for the scientific activities overseas program, which supports cooperative environmental research proj ects in other countries utilizing excess foreigii currencies held by the Treasury. No funds were appropriated for this activity in fiscal year 1975. The request will restore the program to the fiscal year 1974 level and pro- vide support for EPA participation in a special Polish-American energy research program. For our management and support activities, which cover program direction and administrative functions together with a wide variety of "overhead" costs, we are seeking an additional $14.2 million. The bulk of this increase will cover costs for items such as space rental, communications, utilities, building repairs and improvements and centralized ADP services. Other increases are directed at sub- stantially expanding the effort which we are now giving to the prep- aration of environmental impact statements, improving our audit coverage of grants for waste treatment plant construction-I might add an area of very real concern with the expanded funding available to the program-and meeting the rapidly increasing workload faced by the legal staffs of our regional offices. These increases, in large measure, relate to the increased emphasis we are placing on construction grants management. You will note that the President's budget also includes estim a tea for the July-September 1976 transition J)eriod. These estimates pro- vide for continuation of EPA programs through this period a.t their fisca.l year 1976 levels. No new starts or other substantial changes are planned during that period. While the foregoing diE cus~ion focuses on EPA-funded activities, I think it is important to note the major effort being made io~.reducc pollution from Federal instellations. PAGENO="0132" 126 As you know, Executive Order 11752 mandates the cleanup of all forms of pollution-air, water, solid wastes, noise, pesticides, and radia- tion-from Federal facilities. The 1976 budget estimates of other agencies include a total of $415 million for reducing pollution at Federal installations; this is an increase of $72 million over the 1975 level. In closing, I wish to restate my belief that in this year of fiscal and economic constraints our budget represents an equitable balance among our important environmental objectives and other national concerns. My colleagues and I are here to answer any questions you may have. I regard these hearings as an indication of the subcommittee's con- tinued interest in our success, and I welcome the opportunity you have provided to us. Thank yOU, Mr. Chairman. * Senator MUsKIE. Thank you very much, Mr. Train. I would like to take about 10 minutes to ask some questions and then yield to my colleagues. But first, I might askSenator Randolph, chairman of the full committee, who was not here before ~OU gave your testimony, whether lie would like to make a statement. OPENING STATEMENT OF EON. JENNINGS RANDOLPH, U.S. SENATOR FROM THE STATE OF WEST VIRGINIA The CHAIRMAN. I want to cooperate with you, Mr. Chairman. I shall place in the record my opening statement to save time and per- mit us to move on. Then I do have some colloquy I would like to engage in. [Senator Randolph's opening statement follows :J OPENING STATEMENT OF lox. JENNINGS RANDOLPH, U.S. SENATOR, FROM THE STATE OF WEST VIRGINIA When the Environmental Protection Agency was created in December of 1970 it was assigned one of the most important tasks of any government agency. The responsibility of this infant agency was then and remains today the protec- tion of the health of the American people. In a sense, it might be said that we needed protection from ourselves. Man created pollution and only man can end pollution and the threat it. poses to our well-being. If this sounds like a formidable undertaking, it is because the job is truly huge. In our successful pursuit of prosperity we neglected to properly care for the country that so generously provided us with the basis of our wealth. As a mature nation, however, we know that our prosperity was purchased at the price of contaminated water, smoke-filled air and mountains of garbage. The Environmental Protection Agency was created as a focal point of our actions to correct past abuses and prevent their repetition in the future. The agency is the governmental reflection of the environmental ethic reshaping many of our tradi- tional attitudes. To carry out its responsibilities, the Environmental Protection Agency has been armed with a series of laws which can he effective in alleviating polution but which I believe were fairly written by the Congress as to their impact of all segments of society. Fiscal support for this effort has been generous. Our purpose today is to review the spending proposals of the Environmental Protection Agency in the context of programmatic needs for fiscal year 1P76. The financing situation for the Environmental Protection Agency's programs 1ia~ been altered somewhat in recent days by the Supreme Court and subsequent action by the President to release funds for water pollution control. This is a substantial amount of money-$9 billion to be exact-but it is still only one area of the agency's activities. PAGENO="0133" 127. The Environmental Protection Agency has important responsibilities in carry- ing out provisions of the Clean Air Act as well as other features of the water pollution program, solid waste disposal activities and noise pollution control. To fulfill these responsibilities, an adequate budget is, of course, necessary. We want to discuss with you, Mr. Train, the procedures by which the budget request for the Environmental Protection Agency was developed and the relationship of the proposed spending levels to the requirements of law and the expectations of the Congress. With our country in the grips of an economic recession, there is a new dimension to all Federal activities. I refer specifically to their utilization for the creation of jobs and the stimulation of recovery. Late last year Congress approved the Job Opportunities Program under the sponsorship of members of this Committee. Among its provisions is a procedure to determine the potential of Federal programs to create jobs. 1 believe that our inquiries today should include a review of the Environmental Protection Agency activities and the ways in which they can be used to provide jobs for unemployed Americans. Mr. Train, the budget review procedure by the authorizing Committees is in general a new one f or the Senate, resulting from the Congressional Budget Act of 1974. In our case, however, the Committee on Public Works has in the past con- ducted hearings on the spending plans of the Environmental Protection Agency. We have some experience, therefore, in analyzing the budget of your agency. I know that the members of the Committee look forward to continuing this dialogue today. Senator MIJSKIE. All right. We will try the 10-minute rule and see how that works. Thank you very much, Mr. Chairman. I would like to focus again on the water pollution construction grant program, not that there aren't alot of other areas of importance, as I indicated in my opening statement and as yon have indicated in your statement, hut because of the current interest in this program and the possibilities for expanding it to meet our economic problems as well as our environmental objectives. I would like to probe just a little bit more and get some information, if I could. First of all, what is the current average monthly obligation level of the construction grant program? Mr. TRAIN. The current average? We are hoping to obligate a total of about $5 billion by the end of this calendar year which would give you soiue idea of the average. I would suppose the current average would not be much over $200 millioii at the pre~ent time. We do expect that it will rapidly climb in the months immediately ahead. Senator MTJSKIE. Does that represent a doubling of the monthly rate? Mr. AGEE. Yes, sir, approximately. Senator MIJSKIE. I understand that 0MB will allow for that greater obligation rate. Is that correct? Mr. TRAIN. Absolutely. I have had no discussion of any kind to the contrary whatsoever with them. We are going to be obligating and moving these funds just as rapidly as we possibly can. Senator MTJSKIE. And there are no constraints established by 0MB at all? Mr. TRALN. There are absolutely no constraints whatsoever from 0MB on this program. Senator MUsKIE. With respect to the Supreme Court decision, I take it fron'i what you have just said that you regard that as corn- PAGENO="0134" 128 pletely unleashing the impounded funds without any mental reser- vations or purposes of evasion. Mr. TRAIN. EPA is totally unleashed, there are no strings attached on these funds at all. Senator MUSKIE. The reason I felt constrained to ask that question- Mr. TRAIN. Other than those in the statute. Senator MUSKIE. The deferral resolution is still pending and we have to decide what to do about that, if anything. Since there is a difference of opinion between GAO and the administration on the application of title X to the funds impounded prior to tile effective date of tile Budget Act I tllougllt I had better put this question to make sure that we eliminate any cloud that may exist by virtue of tile impoundments under title X of tile Budget Act as well as under the authorities that President Nixon asserted when he invoked the impoundments. Mr. TRAIN. If there is any way I can relieve the committee's mind on this I would be delighted to do it. I can assure you that there are absolutely no strings attached. I discussed tilis with Jim Lynn, the new Director of 0MB, shortly after the Supreme Court decision and it was his personal view and his assurance to me tilat there should be absolutely no strings attached. I know he subsequently discussed this with tile President. This was the policy that EPA was directed to pursue. Senator MUSKIE. Tile policy is damn the torpedoes, full speed ahead. Is that right? Mr. TRAIN. I do worry about some of the torpedoes. I think we had better talk about some of them before we are through. But full speed ahead is the policy. Senator MIJSKIE. I take it you probably, or someone on your staff, has examined testimony we received last Friday from several State water pollution control administrators, tile president of AMSA and the National Utility Contractors Association. They indicated in tilat testimony all ability to proceed at a much faster rate than the rate they understood to he tile present policy. But at the same time there appeared to be some difference in their ability to do so. The testimony from Maine, for example, was that Maine could put all of its share of $9 billion into construction within 12 months. That is actually begin construction with its share of the total $9 billion and could go beyond that. Some of the larger States indicated reservations about their ability to move that fast. Is there any possibility to begin the objectives of meeting tile abilities of various States to move at various rates of speed to obligate this money? Mr. TRAIN. Yes. I think there are some very real possibilities. This is really a management problem. It is not related to our regula- tions of tile statute. It is a matter of identifying State objectives and putting priority at the construction end which is wilere it should be right now. We should put major emphasis in the immediate near term on step 2 and step 3 grants. It is important that we don't abandon the step 1 planning because in the long run that is how you keep the pipeline filled. At this particular juncture, I think it makes good economic and environmental sense to get on with the j ob of construction as rapidly PAGENO="0135" 129 as possible. And we are going to be pushing at the regional level to do this. I believe we can recognize and give effect to the different capabilities and the different situations of the various States. We do know that there are a number of projects which are awaiting construction; I think a little over 600. I think if we put our full resources behind them right away we can help break that logjam, too. Senator MTJSKIE. The last time you were here we talked about the same subject. Do I gather correctly-I want to he sure that I understand-that the policy just announced here or explained repre- sents a substantial acceleration of the program beyond that that you were prepared to commit yourself to the last time you testified? At that time you were talking about $4 billion that the President agrees to release, $5 billion was still under wraps in the Supreme Court and it was your feeling at that time that the $4 billion represented about the maximum obligation rate that you could conceive of handling. What you are proposing now, what you have described now, is a substantial acceleration beyond that. Am I correct? Mr. TRAIN. At the time I last testified, we expressed the hope that we could reach an actual obligation level of as much as $5 billion, but that with the backlog of unobligated funds the new $4 billion would give us more than ample obligational authority. Since that last hearing we have continued making a very close and detailed analysis of the process within EPA and the States. We are probably in a better position now to identify areas where some im- provement is needed. I should note that the Office of Planning and Management under Mr. Alrn has been conducting, as I believe the committee is aware, a very extensive review, in Washington but particularly in the field of the management of the construction grant program. In cooperation with Mr. Agee's people, Jack Rhett's people in par- ticular, have identified a number of areas where we think we really can make some very significant improvements. I am optimistic that with some management changes, most par- ticularly with the communication of my own sense of the urgency of this need through the agency and with some additional help, particularly on the personnel side, that we can make major progress and accelerate beyond the point which we had originally identified as the outside possibility. Senator MUSKIE. Let me ask you this: As I understood your earlier testimony, it was that your obligation in a given State was `limited by the $4 billion released nationally. Nowdoes your policy admit of the possibility that obligations per- *mitted in a given State could reach its share of the $9 billion in this calendar year if the projects can be cleared that fast? Mr. TRAIN. Conceivably, yes. There is no legal or technical con- straint on it. There is no policy constraint on doing that. Let me say that I did not intend to convey before that we were under a policy constraint not to, obligate more than the $4 billion which the President was allowing. It was our hope to obligate just as much as we possibly could. Senator MTJSKIE. At that time there was still $5 billion impounded. PAGENO="0136" 130 Mr~ TRAIN. There was still $5 billion impounded. Senator MLTSKIE. So that was a policy constraint. Mr. TRAIN. To that extent, yes. But we were also carrying into the fiscal year 1976 something on the order of $4 billion or $5 billion obli- gated funds from previous years. Therefore, we actually had available under the new $4 billion allotment substantially more than $4 billion if we could have in fact obligated it. Thus, there was no poiicy constraint as a ceiling on the amount of obligation. * Senator MISKIE. I find that picture inconsistent with the one that I know to be true in my own State. With respect to the testimony from Maine, there were no unobligated balances available. So that when the $4 billion was released that opened up the possibility of another $40 million, $38 million to $40 million in projects for which no funds were onsite previously and the $5 billion provides another $40 million or so. All of that $80 million, that is representing Maine's share of $9 billion could be obligated and put into beginning construction within 12 months. Mr. TRAIN. That might well have been the case of Maine, Mr. Chairman. But I don't think that was typical of States generally. I think that there were or are a few States who would have had allocated to them the full amount of available funds. But this was not true, in terms of obligation, around the country generally. I would like to have Mr. Agee expand on tha.t for a moment. Mr. AGEE. Mr. Chairman, there are approximately a. half dozen States that have a good chance o~ obligating this money by the end of the calendar year. But it would certainly not be more than that, according to our records and estimates. Senator MUsxIE. With respect to those six, is it possible that they will be permitted to by the end of the calendar year? Mr. AGEE. Yes. They will be permitted to. We encourage the sys- tem to do that. Senator MIJSKIE. Does that include Maine? Mr. AGEE. I will have to check on Maine. Let's assume for the moment that it does. Mr. TRAIN. I think we should assume that includes Maine. iMir. AGEE. After looking at the additional $5 billion just released, our revised estimate for obligations for fiscal 1976 rose from $5.2 billion to $5.6 billion. in other words, from a release of at least $5 billion our obligation increased in fiscal 1976 $400 million. This will have a considerable impact in fiscal year 1977. Senator MusIuR. I have gone over my 10 minutes. I want to try to nail down this one point as much as I could before I yield to my colleagues. But let me ask this one last question at this point and. maybe my colleagues will pursue it. Do you really have a pretty good picture of the projects that States have ready to move, say, within a 12-month time frame into the construction phase? Do you have a. pretty good picture of that? Is there a way for you to get that kind of a picture out of information that is available to you? Mr. AGEE. Yes. Through our management information system we do have that data available to us. PAGENO="0137" 131 Senator MUSKIE. Do you have such a number this morning? Mr. AGEE. There is an additional $5 billion that will be obligated by our estimate by the end of this calendar year. That is through calendar year 1975. Senator MUsKIE. That represents the maximum potential from your point of view. Does it represent the maximum potential from the States' point of view because they have complaints about the slowness or they have had complaints about the slowness of the rate at which what they believe to be projects ready to go and obligated? Mr. AGEE. Mr. Chairman, I think we are talking about the same data. Our regional offices work on a day-to_day basis with the States. I think we are fairly well in tune with the projects that can get to the obligation stage by the end of this calendar year. Senator IVIusIIE. I won't take more time to pursue it unless you want to say something, Mr. Train. Mr. TRAIN. I don't want to take any more of your time. But I thought I would add one bit of information which I find is useful for perspective: In 1974 in this program we obligated $2.6 billion, of which $1.2 billion were reimbursements. So we were actually obligat- ing new construction grant funds at the rate of $1.4 billion in 1974. In fiscal 1975, it is estimated to be $4.2 billion, of which $700 million will be reimbursables for a total of $3.5 billion for new construction. in 1976, $5.6 billion will be obligated and all o this will go for con- struction grant activity. So the rate of obligation will go $1.4, $3.5, $5.6. That is a fairly rapid acceleration in the rate of obligation in a program of this sort. But as I said, I am still not at all satisfied with this. I am not indicating this by way of trying to relieve your concerns at all. You should be concerned about this program and we very definitely are. Senator MU5KIE. Out of this colloquy I get these two points: One, that there is no policy constraint with respect to any part of the $9 billion; that the only constraints of your ability at the national level and the States' ability at their level to actually go forward and do the planning and do the engineering and to get the proj ects ready for bid and construction. Mr. TRAIN. That is correct, sir. Senator MUSKIE. Practical limitations as you see it? Mr. TRAIN. We have one very real concern which I am sure that yoU share and that is the problem of maintaining accountability and control over funds in a program of this size to protect it from fraud and other misuses of funds. Obviously, the larger the program becomes and the more we try to accelerate the moving of these funds, the greater risks we run. As you know, we do have substantial limitations in terms of per- sonnel within this program which constrian our ability, frankly, to do everything that we otherwise would like to do in order to protect the program from that kind of abuse. This is something that we have to keep in mind. I want to accelerate this program, but I am sensitive to the fact that you may get me in here a year to two hence and say look at all the mismanagement. I want to express this concern as frankly and as bluntly as I can to you. It worries us. PAGENO="0138" 132 We don't want to sit on our hands because we are worried and just dribble the funds out to be on the safe side. We are not going to do that. But you had better be aware that we are going to he running some risks in terms of audit. Senator MIJSKTE. Thank you. Mr. TRAIN. If you could give us any assurance of congressional intent that we move ahead and run a few risks, that would be very helpful. Senator MTJSKIE. We would llke to give you the manpower if the administration wotilci tak.e it. I know you would, or at least I think you would. Mr. TRAIN. We are as you know, shifting 161 new people into this program. Substantially all of them will go into the field. We are not going to build up Jack Rhett's headquarters staff. In point of fact this is merely a reallocation of personnel from within the agency. Senator IVITJSKIE. Let me yield to Senator Baker. Senator BAKER. Mr. Chairman, thank von very much. I have a commitment I have to keep on this subject but with a different person at 11 o'clock. I will postpone my questions. Senator MUSKIE. Senator Randolph. The CHAIRMAN. Thank you, Mr. Chairman. I am not critical, Mr. Train, as I pose certain questions, but I know that you a.re here after giving us a very, I call it, thorough statement, to have colloquy that we may develop, hopefully, additional facts. One fact as we start that I know people will not appreciate my calling attention to again is that this room is 78 degrees. We are going to talk about energy and research. That is why I am speaking of it. So I guess Barry Meyer, the chief counsel and chief clerk, will take notice, because it is 10 degrees higher than it should be. Senator MUSKIE. I thought that had something to do with me. The CHAIRMAN. But it is a very important matter. I continue to call attention to the Architect of the Capitol to the overheating of the rooms here in the Capitol itself and in the office buildings serving the Capitol Hill. It, of course, is practically the same in the rooms Oil the other side of the Capitol in the House buildings. I do this for the reason even before asking the question-I will cut flY\T time and stay within it, Mr. Chairman-I don't think the Ameri- can peopleyet realize what we, \ir. rfl.ain can do voluntarily in the field of energy conservation. We know we can save upwards of 160,000 barrels of oil daily by observing the 55-mile an hour speed limit. In our Federal Aid Highway Act last year we placed the language necessary to withhold the high- way funds to the States if they do not enforce this Federal measure which it now is. Across the broad front we have the opportunity as individuals as well as units of government, including the Federal Government, to have the necessary conservation program which can, in a sense, lessen the problems of the importation of oil,whic.h continue to plague us and even cause differences as we attempt to compromise the so- called package here On the Hill with that which is coming from the White House. So it is not a minor matter that I bring to your attention for a cou~. ple of minutes this morning by an illustration of just in one room a temperature that is 10 degrees higher than it should be. PAGENO="0139" 133 Last year when the budget estimates for fiscal 1975 were given to us you will recall, Mr. Train, that the administration had a particular appeal which it set forth to Congress, asking us to act expeditiously on those items that involved energy and research; $134 million was the final figure for fiscal 1975. This year the only new program initiatives that have been given the Presidential approval, as you know, are in the field of energy. This committee responded to those appeals that I mentioned and we of the Congress enacted last June the energy research measure. I was disappointed to follow through on this subject finding that many months later many, many of these energy funds had not been programed or obligated. Maybe there is a reason. The Environmental Protection Agency requested a specific program for research and development for the fuel cell program. The House and Senate directed special attention to this program and provided specific funds. NOW, after more than 7 months since the requested funds were prorn vided, EPA, as I understand it, has not obligated those funds. I have these three questions. If these energy research programs were critical, they were of course critical or the administration would not have acted to consider separately ahead of the other annual appropria~ tion bills those matters that I have mentioned, why have we not followed up any funds obligated shortly after enactment of the bill early last year? Why were these not brought into focus? Then a second question. Of all the R. & D. funds that were ap~ propriated to date, how much has been obligated, how much remains unobligated as of today? What plans does the administration have for obligating the $54 million provided in Public Law 93-322? That was over 7 months ago, as I have indicated. I know that you will. want to provide us with the specific justification for previous delays in obligating funds for each item as set forth in committee reports on Public Law 93-322. I think you will want to tell us what specific steps will be taken within perhaps the next 30 days to change this situation. Mr. TRAIN. You are quite correct, Chairman Randolph, that all the funds you described have not been obligated as yet. I am not sure that I am fully aware of the reasons for this. Recently within the Agency, we asked each of our program ad~ ministrators, all of whom are here today, to explain where they stand insofar as obligations are concerned with their programs. Perhaps 1 can ask Dr. Talley to address this question. The CHAIRMAN. Dr. Talley, would you follow the partial explanation of Mr. Train? Mr. TALLEY. In terms of the base H. & D. budget, the commit~ ments of the funds should be compared to a straight line plot--0 per~ cent inthe beginning of the fiscal year, 100 percent by the end-and they do fall on such a line. That is, we are on schedule with respect to our base program. : The energy moneys did not arrive until the late fall. The last of the moneys became available at the end of December. Since the total amount of money authorized by Congress was less than that planned for the full program, we reprogramed the dollai~s to fit a lower level and sent letters to the appropriat~on committees in both the House and the Senate, as we were required to do. PAGENO="0140" 14 We have yet to receive permission to commit these funds. Was the mention of the fuel cells a specific question or just an example? The CHAIRMAN. There are a list of items, of course, in the committee report, which I have asked be placed in the record. But let's take development of commercial and practical fuel cell designs for both stationary and mobile energy storage and transmission application. Mr. TALLEY. ii I recall the history correctly at the time the proposal was originally made, it was a $6 million item. The CHAIRMAN. That is right. That is correct. Mr. TALLEY. When that program was suggested by one of the staff people at one of our laboratories, there was no civilian agency capable of handling that sort of program. EPA was the natural vehicle. Since that time, ERDA has been formed. We have determined that ERDA will undertake development of the program with no transfer of funds and we will reserve $300,000 from our energy money to examine the environmental impact of the fuel cells. ERDA has the responsibility for the cleveloument. We have the responsibility to make certain that, as that development roceeds, this new energy source or new method of packaging energy will be env~ronmentaily acceptable. The CHAIRMAN. Dr. Talley, I think you are telling us what we in the Congress ought to recognize; that is, often we have overlapping agencies and we lose valuable time in the use of funds for the purposes that tne Congress has set forth. I think we deserve to censor ourselves oftentimes. But I know here that I don't want to speak of it in any explosive manner, but some- times we have a hybrid-headed operation in carrying out these pro- grams. We are not able to clearly set them into the channels where they can be moved forward. Is that correct? ~Ir. TALLEY. It creates one more set of constraints on the operation of the program. I would like to add that iii January the first inter- agency agreements were signed by ERDA and EPA. Within the last week we put forth the first $400,000 for a study of uranium mine tailings which ERDA will carry out. The CHAIRMAN. That is the IVlinnesota problem? Mr. TRAIN. No, this is a uranium problem of mine tailing which has arisen in Colorado and throughout the Western United States. You are referring to the tailing problem in Lake Superior which was an asbestos problem. If I may just make a general comment, Senator Randolph, your sense that this obligation has been niovmg pretty slowly is entirely correct. It is incumbent upon us to get into this problem and see if we can't move these funds more effectively. I would mention that I suspect one of the constraints here has been the fact that while we have a substantial increase in funding, we have no additional personnel for this program. The CHAIRMAN. I think that the explanation, plus your assurance of moving as realistically as yOU can, and that is what the Congress should want, nothing more, nothing less, personnel problem is one that I can understand is very real. PAGENO="0141" 135 J \~Tjfl ask one question, Mr. Chairman, so that I trust I am within the 10 minutes. In your statenient, I noted that you cited the com- pletion of several demonstration projects for sulfur oxides control as a reason for reducing research on what I call control technology. The sulfur oxide control program stayed in EPA, (lid it not? Mr. TRAIN. That is correct, sir. Tile CHAIRMAN. And it was not transferred to the Energy Research and Development Administration and the reason is perhaps because of assurances that the progr am would receive-I use this term- adequate and continued support in EPA. I am a little bothered this morning when I am told that the Interior Committee is at this hour or earlier receiving testimony that addi- tional funding is necessary for research in sulfur oxide control technology. What is your thinking on this matter? Mr. TRAIN. First, as I think you are well aware, I certainly share your sense of the very high priority which this research and develop- nlent should receive. As I recall, the reason for the reduction in funding does not reflect any reduced priority being given to the program in the Agency. The nature of paiticular projects, however, has changed as between the 2 budget years. The two projects that I referred to in my statement had very substantial capital startup costs for hardware, investments which have now been made. The projects have now moved into the opera- tional phase which will require a certain amount of funding and monitoring, but not substantial hardware costs. Senator RANDOLPH. Mr. Chairman, are you keeping the watch? I am sure I am over the time. I want to cooperate with other committee members. Mr. TRAIN These two very important projects should complete their demonstration phase within the 1976 fiscal year. Senator MusKIE (presiding). Thank you very much, Mr. Chairman. Senator Buckley. Senator BUCKLEY. Thank you, Mr. Chairman. Mr. Train, among the recommendations to amend the Clean Air Act are extending automobile emission deadlines to avoid sulfate pollution and permitting intermittent control strategies as an alter- native to continuous emission reduction in powerplants to avoid installing expensive scrubbers. In view of these i)rOl)OSaiS, what is EPA doing in the area of toxico- logical studies on the effects of sulfates and what is EPA doing in the area of ecological studies to determine the instance and effect of acid rains? Mr. TRAIN. I think I had better show my wisdom by asking Dr. Talley to answer that question in detail. Cu the problem of sulfates, we are mamta~n~ng not only a fairly high level of resecich activity, but the 1976 budget reflects an increased level of activity on health effects, control technology and on the question of the tranepoit of these pollutants, an area in which a good deal of work still needs to be done, Wilson? Mr. TALLEY. I would like to add one thing. in taking a look at the organ~zatioll of the Office of Research and Development and in trying PAGENO="0142" 136 to lay more emphasis on the health and ecological research side of the .house~ `I must admit that I find that I am dipping into a small pooi of manpower. The number of people competent to perform health research, MD's, pathologists, toxicologisLs and the like, is limited. Other Federal agencies are also interested in the same people. Senator BUCKLEY. One of the problems that this committee specif- ically faces, and the Congress as a whole faces, has to do with the requests for modifications of the Clean Air Act on a rather pressing basis in light of our energy problems, economic problems and others. .Wha~t 1 really am groping for is to determine whether or not you will be having specific enough information, certain enough information in, order to give us guidance or whether we still are groping for final answers or at least guides to action? Dr. TALLEY. While I cannot say that in so many Years we will have such and such numbers, each v~ear our data base improves. Senator. BUCKLEY. Will we have the basis between now and June for some' guide. as to what we ought to be doing with respect to the .Clean'.Air Act? Mr. TRAIN. Yes. Senato.r MUSKIE. The answer is political and not scientific. Mr. TRAIN. As Dr. Talley said, you have to operate on the basis of the best available data at anygiven time. We do not have all of tha answers in many areas. I could not assure you that by June we would. But I do believe that we have a very broad basis of informa- tion gnd scientific data sufficient to support effective and. intelligent legislation by the Congress in terms of consfant control technology and in terms of' the sulfate problem. We, of course, will be discussing these in detail. Let me mention just a little short l)udget summaly here in these areas. For 1976, the combined R;& P.. program of the Agency dealing with both sulfates and sulfur oxides encompasses the following: Health effect studies, $9.5 million; sulfate transport and transforma- tion studies, including model development, $3.7 million; development of sulfur oxide monitoring instrumentation, $1 million; sulfur oxides `eifiissions characterization, $5.4 million;; a.nd sulfur oxide control technology, $25.5 million; for a total of $45.1 million in this one very .lmportant area. Mr. STRELOW. Let me add that another perspective on this would be the question of how soon EPA would be prepared to implement an ambielit air quality standard directed more specifically to the sulfate p~obiern than the current sulfur dioxide standard. The best proximation from our own scientists on this is 1979 or 1980. So although we can certainly give guidance, it is not going to he' the definitive sort of guidance that `we would want and expect ultimately to have in terms of a specific standard. Senator BUCKLEY. Will you he in a position to provide guidance some time in the near term on the prudence of encouraging catalysts in automobiles? Mr. TRAIN. Yes. We doubtless will be wanting to discuss this at length following the announcement of my auto emission decision. As I said at the outset of the hearing, I am not going to be able to aimounce that decision until Wednesday. PAGENO="0143" 137 Senator BUCKLEY. Thank you, Mr. Train. I have a parochial interest in whether specifically you are conducting ecological studies on the indicence of acid rain. I understand there is a fair amount of acidity falling on New York State. Dr. .rfALLEY. Not only is that true for New York State, but for some unexplained reason 2 years ago, the first acid rains were reported in California. We still don't know where they are coming from. Senator BUCKLEY. We do know there is a trend. Dr. TALLEY. Yes. Senator BUCKLEY. I would appreciate some clerification or explana- tion of some information that comes in this cheerfully bound book called Special Analysis of the Budget of the U.S. Government for Fiscal 1976. On page 275, we have a listing of the various areas of environmental studies that are going on under 11 Federal agencies. One of them is characterized as "Understanding the impact of Man on the Environment," another one, "Economical and Other Basic Environmental Research Involving the Supplement of Baseline Data, and Development of Plants, Animals, et cetera." Then on the following page, table Q-5, on page 276, there is a list of a number of agencies under the category, "Understanding, Describ- ing, and Predicting the Environment," for which millions of dollars are spent, a total of $1.3 billion estimated for fiscal 1975. Nowhere on that list is the EPA. It seems to suggest that in terms of the focusing of research efforts within the executive that EPA is somewhat of an orphan. Is this true? Is this desirable? * Mr. TRAIN. I don't have that table iii front of me. I don't know that I can really address your point. There is a great deal of environ- mental work done in other agencies. Practically the entire NOAA budget falls within areas such as monitoring and understanding the environment, though it focuses primarily on mostly upper atmosphere, oceanographic work, and climatic studies. I don't knowwhy you don't find EPA on your list. Senator BUCKLEY. The Smithsonian is the least of the ones spe- cifically listed. It has $8.12 million, and underneatl~ that is other agencies, $22.7 million. EPA is presumably among the other agencies. Commerce has $370 million. Mr. TRAIN. We have in our research program in EPA over $250 million. Exactly how this is described by 0MB in the summary, I am just not sure. Senator BUCKLEY. Are the efforts in the overall environmental research field scattered among these various agencies coordinated at some point? Are you aware of what is happening in these other programs? Mr. TRAIN. Yes ; broadly speaking. While we are probably not aware of everything, wedo have a good deal of interagency coordination and interagency workmg groups. When we had an Office of Science and Technology, of course, that was one of its functions. 0MB provides a considerable coordinating function and so does the Science advisor through the National Science Foundation. Everybody is bursting to answer the question. Mr. AL~m. Let met just make one comment, Senator. In the category of pollutant identification measurement monitoring, we have $6.3 million. Indeed, from the table you mentioned, we have about $47 PAGENO="0144" 138 million covering those areas. 1 just wanted to make that point while we are here. We can supply it for the record. Dr. TALLEY. To reemphasize what Mr. Train mentioned, EPA does not have the majority of the environment II. & D. dollar within the Federal Government, hut the total amount of money spent. for Federal environmental research is dwarfed by the private sector-the academic institutions and industry. EPA must continue to rely on the other Federal agencies and the outside community to substantiate its base. One example, I think, of the excellent cooperation among the agencies is the energy R. & D. program. The so-called Gage committee end the King Committees. worked for almost a year to produce comprehensive plans in the health and ecological effects, and the processes and controls. It is under those plans that call for coordina.tion of 14 Federal. agencies that we are going forward with the fiscal 1975 and 1976 programs. Senator BUCKLEY. What concerns me is that as the EPA has the power of decision affecting billions upon billions upon billions of dollars in this economy. I just want to be reassured that EPA has available to it the most up-to-date information necessary in order t.o make these ~lecisions wisely. Dr. TALLEY. Yes; tha.t is our intention and we will continue to do so. Senator BUCKLEY. Is it your intention or is it a fact? Dr. TALLEY. In the main, yes. Senator BUCKLEY. I think I have half a. minute left in which I will pose a question. Yesterday or the day before, I forget which, we had a number of representatives of State environmental offices testif~ ing on the release of these funds. They expressed a tremendous feeling of support for the so-called Cleveland amendment that would transfer to the States an enormous amount of discretion in the setting of priorities, approval of plans, and so on. No. 1. What is your attitude, Mr. Train, towards that amendment; No. 2. Would shifting a burden on the States relieve you of some of your own special problems? Mr. TRAIN. I think that the so-called Cleveland bill is a very useful approach to the problem. We support that legislation in principle. Whether we ha.ve reached agreement on every detail, I am not certain. We do have a policy of delegating as much of the review function to the States as we can at the present time. One of the problems that the States have is one of resources. I think this is a very valuable part of the Cleveland bill approach. It does permit us to utilize up to 2 percent of construction grant funds. to assist in providing the resources to the States to carry out this job.. Simply having a delegation authority is of very little benefit unless we can transfer some resources along with tIme authority. i think that over some period of time the implementation of this legislation, if enacted, and its approach would substantially improve the situation. It would take time for the States to staff up and train personnel to be in the position t.o carry on these activities. So that even with enactment, the effect of the Cle.veia.nd bill will. be some. little ways off. PAGENO="0145" 139 Senator BUCKLEY. Thank you, Mr. Train. Mr. Chairman, I don't want to digress my time, but I would suggest it would be useful to this committee, if the EPA, specifically I\'lr. Train, were to provide us with his own ideas as to what areas of responsibility ought to be clearly retained by EPA. Thank you. Senator MUsKIE. Without objection, we appreciate that. Senator Gravel? Senator GRAVEL. Mr. Chairman, I would rather await my turn,.. as I came in late and I do want to talk to Mr. Train before 12 o'clock. I would really like to await my turn, provided that I am not pre- cluded from talking to these gentlemen. Senator MUSKIE. I don't think it will. Senator GRAVEL. Before they go to lunch. Senator MUSKIE. Senator Morgan? Senator MORGAN. Mr. Chairman, I only have a couple of questions for Mr. Train. Mr. Train, there has already been some conservation about con- cern for the health effects of sulfates as they are pollutants. As I recall reading yesterday in the paper, there were some news reports concerning the effect of the catalytic converters and the staff has had some reports that EPA's research and the sources and health effects of sulfates has been reduced or have been reduced. Do you have any comment on it and if not, could you tell us what is being done to determine the effect of sulfates as air pollutants on the health of our people? Mr. TRAIN. We are actually increasing the level of support for this program, both in terms of money and people. I don't know the basis for the report that we are reducing support. It has a very high priority with us. It is obviously a very difficult problem, both in terms of the catalytic converter and in terms of the question of fossil fuels generally. I think we all recognize that sulfates in their various chemical con- figurations do represent substantial health hazards. We do need to maintain a strong research program here and we are. Senator MORGAN. Then you are not reduc.ing? Mr. TRAIN. Absolutely not. Senator MORGAN. Did you have an occasion to see the news story yesterday with regard to the effect of the catalytic converters? Mr. TRAIN. No; I have been trying not to read any of the news stories on this subject for the last 2 or 3 days Senator MORGAN. I don't cite the news stories as authority but there was some question about the argument apparently that had taken place between Chrysler and EPA and others about the effects of them. I just wondered if during the period of time that the argument has been going on, if EPA has really been trying to determine the effects oi~ the catalytic converters. Mr. TRAIN. We have had a very extensive program in this regard. First, we made a major effort to ehartcterize the emissions them- selves. In other words, to determine just what is coming out of the exhaust when a catalyst is used. While we knew there were sulfates, we didn't know exactly which enes and what the quantities were. We have now succeedec, largely over the past year, `n arrivin at a quite accurate characterization of tile nature of these emissions. 50-194-75-10 PAGENO="0146" 140 We have developed a much closer analysis of health effects as they relate to sulfate emissions. Because of the importance of the subject during the recent EPA hearings on the suspension issue, I scheduled a special additional 3 days simply on the sulfate question in order to get a real focus on that subject. At that time EPA studies were made available. We also heard a number of outside witnesses who addressed the subject-the motor companies and the oil industry. So, I assure you that there are still things we would like to know, hut we have maintained a very substantial level of activity and we are increasing that level. Senator MORGAN. Thank you. Senator MIJSKTE. Senator McClure. Senator MCCLURE. Thank you, Mr. Chairman. Just to follow on the question that was asked by Senator Morgan just a moment ago, on the effects of the catalytic converter, I think, some of the people at EPA will recall that I have raised that question with EPA in April of 1973, at which time I suggested, based upon the basic chemistry Of the catalytic converter that there was going to be a sulfate and sulfuric acid problem and EPA at that time said there is no proof that that exists. Therefore, we are going ahead with the catalytic converter, in support of the catalytic converter. I raised that again in the spring of 1974 and EPA again said we are going ahead with the catalytic converter. You have no evidence that there is any problem. Late in. 1974, EPA said we have made the discovery. There is a problem. Well, I recite that only as an indication that EPA hasn't always been as farsighted as many of us wotild hope that they were and I welcome the great emphasis that is placed in your message today on the fact that you are doing basic research to make determinations to policy. That is, I think, what many of us have been asking for a. long while. Let's base the decisions on solid, scientific fact and leave the conjecture to the politicians who the public has long since decided are very fallible indeed. Let's at least make the mistakes rest here, not with you. And the States have rested here on many of these decisions. But in some instances, EPA has fostered those mistakes by giving us inaccurate information or refusing to recognize that there were problems where problems did exist. The other side of that is I have been one who has been very critical of the scrubber technology. EPA may yet prove to he right on that one. But~what 1 say, may yet prove, because I think ibis not yet proven, that the scrubbers are commercially feasible in operation on these large commercial plants. Without spending a great deal of time going into specific examples like this, could you comment concerning your current status of scrubber technology in the removal of the oxide of sulfur from stack acids? Mr. TRAIN. Let me make two comments. On the first subject, which is the catalyst question on sulfate emissions, I testified before this committee as I recall in November of 1973, and I stated that we recognized that a very real potential problem. We did not know the PAGENO="0147" 141 extent of the problem. We did not know if there was a problem or at what point it was going to be serious enough as to require some control effort. I don't believe there was any lack of recognition on the part of the Agency, but there was and still is a great deal of debate amongpeople on the outside, as well as within the Agency as to exactly what all of this may mean. As far as the. catalyst itself was concerned, this technology basically was developed not by EPA but by the automotive industry in co- operation with catalyst in anufacturers. The industry's research went back into the late 1950's on the catalyst. And, as fa.r as I know, at least some elements of the industry were aware that there were sulfate emissions. These findings were never mentioned publicly in any of the early discussions of catalyst technology. Senator MCCLURE. It was not mentioned by those who wanted to put catalysts on, surely. Mr. TRAIN. I really am not familiar with all of that background. I am not avoiding the question, but I want to be fair to our own Agency in t.his. There was a great deal of concern among some of the scientists, particularly the health people, which was. fully reflected here before the ~ommittee a year ago last November. We were confronted at that time with the fact that to do anything else at that moment would have essentially involved abandoning the automobile emission control program I do have the suspension. decision to make. It is hard for me to dis- cuss this in further detail without getting into matters which may be overly sensitive. Senator McCLURE. There were two things that were involved in my firstquestion. Let me interrupt at this point. I don't want to go into *~he whole question of air quality standards at this time. My only point in raising it was I think there were certain predictable results of actions t.hat were being taken, that EPA shared in the responsi- bility for choosing one course of action over the others and while doing so, in my judgment, failing to point with sufficient clarity to the consequences of thOse actions. Even you indicate that a great deal was known about it and the scientists within the Agency pointed with alarm to those effects. But the burden of EPA testimony was that regardless of those effects we are going to go ahead with the catalytic converter. Mr. rPnAi~\ I think that would have been the consensus of the scientists based upon infoima tion then current. There are calculated risks that you have t.o take in all of these things. Senator McClURE. There are burdens in those calculated risks that sometimes bear more heavily on other people than they do on the bureaucracies that make those decisions. Senator MU5KIE. Would the Senator yield? Senator MCCLURE. I think we will get involved in a great big debate if I yield Senator MUSKIE. I think the other risk is also involved. If the deci- sion had been to ai)andon auto emission standards because of this debate, the calculated risks involved, then those who share your point of view would have carried a heavy burden, too. PAGENO="0148" 142 Senator MCCLURE. As I indicated, we would probably get off on another subject if I yielded. I don't want to get off onto that other subject this morning. Senator MUSKIE. Then I won't ask you to yield. Senator MCCLURE. I am grateful. Mr. TRAIN. You did want me to comment on the scrubbers? Senator MCCLURE. Yes. Mr. TRAIN. As far as the Agency is concerned, I don't expect to try to shift or avoid any burden of responsibility for any decision that I have participated in. If anything ever turns out to be wrong, I am as much to blame as anybody else and maybe more so. So you do not need to worry about my being willing to share the responsihiliti or assume the full responsibility. Senator MCCLURE. I have never seen you duck that responsibility yet. I applaud that. Mr. TRAIN. With respect to the scrubber issue, as discussed earlier, we nave continued a very substantial research and demonstration progi'ain. More to the point, there has been a very substantial in- crease in the commitments within industry itself to this technology. A year ago last September when we had administrative hearings. on this subject there were some 10 systems actually installed. There are now 19 or more actually installed. There were a tota.l of 44 under construction or committed to last year. The total is now over 100. I think that there has been a very strong movement in this regard. during a very short period of time. The argument over scrubbers, and Lord knows there is plenty of argument over scrubbers, has tended to shift from the reliability side of the question t.o the economic side of the question. They are obviously very expensive technologies. We maintain that the reliability of this technology-and there are about six or so alternatives available--iias been very rapidly im- proving. Looking toward the future, there should be no major probleni on the reliability side. Senator MCCLuRE. Looking toward the future. How about the present? Mr. TRAIN. Now a.nd in the future. Like any new technology, one would expect that it is going to improve as it becomes installed and people gain experience with it, unless it is so installed it is not going to improve. Senator MCCLURE. Again, I don't want to get into an extensive discussion of that. I would hope and expect that we will get back to that later. There are a couple of general questions that I want to ask, one in regard to your test,~mony says you expect that there will l)e $4 billion committed to the conStruction of treatment plants; that $4 billion will create 80,000 jobs. My mathematics would indicate that that is cii expenditure of ii5O,000 per job created. Could you give me some kind of a basis for those figures? Mr. rFRAIN These figures are based on the analysis and estimates. of the Bureau of Labo.r btatistics. Senator MCCL aim. I wonder if you could furnish that for the record, some supportive data for that. It also indicated that there would be an equivalent number of jobs created outside of the direct construction activities. PAGENO="0149" 143 rfllat would reduce it if ~0U divide by thtit larger number to $25,000 per job created. The reason I ask the question is I think rather obvious, that Con- gress is involved in an evaluation of its programs in an effort to direct our resources towards those that create jobs in the high unemployment areas. Mr. TRAIN. We would be happy to do that. Senator MCCLURE. There is a debate going on whether Public Works are relevant to job creation and figures like $50,000 per job or even $25,000 per job rather seriously threatens our ability to convince people that Public Works can create jobs. So I would like to have the basis of the analysis so we can feed it into the other discussioli. [The following information was excerpted from the report entitled, "Manpower Implications of Alternative Levels of Sewer Works Con- struction," issued by the Bureau of Labor Statistics, December 1973:] I. INTRODUCTION Government expenditures, whether for direct purchases of goods and serv- ices or in the form of grants to State and local governments or transfers to individuals, generate requirements for manpower in specific industries and in specific occupations. Depending on the specific nature, magnitude, and timing of these expenditures, the resulting manpower impacts can cause dislocations in the economy. Manpower supply-demand bottlenecks or imbalances can develop resulting ill unacceptable price increases and/or the draining away of manpower from other, equally socially desirable activities. Recognizing the potential manpower im- pacts of Federal funds for sewage plant construction activities, the Environ- mental Protection Agency provided financial support to the Bureau of Labor Statistics to undertake a study to assess the manpower implications of alter- native levels of Federal funds for sewage works construction activity. This report or working document presents the results of that study for use by the Environmental Protection Agency in developing a plan of action to meet sewer works construction needs. It shows estimated mapower requirements- expressed in terms of on-site year long jobs-associated with alternative levels of Federal funds for sewage works. construction. The analysis was limited to the direct on-site construction manpower requirements and does not include esti- mates of the off-site manpower required to produce or transport the materials and equipment used in~the actual construction phase. Data are presented show- ing the manpower required in sewage works construction consistent with the Bureaus high services or basic model of the economy in 1980; 1 the manpower requirements associated with the funding levels and timing of the Federal Water Pollution Control Act Amendments of 1972; and the manpower require- ments resulting from the Administration's plans to "spread out" the actual *spending of the funds appropriated nuder the 1972 Amendments. Also presented are a general analysis of manpower supply in the construction trade and the manpower implications of the alternative "growth paths" or levels of Federal funding. `Sic the U.S. Economy in 1950, BLS Bulletin 1903, and Patterns of U.S. Economic Growth, BLS Bulletin 1078. PAGENO="0150" 144 The estimates of job requirements associated with various levels of expendi- tures should be viewed oniy as rough `orders of magnitude" and not as precise estimates. This primarily is due to the data gathering and analytical studies of several divisions within the Bureau of Labor Statistics that comprise much of the input to this study were flot specifically designed to yield the exact types of data and analytical techniques needed to fully assess the manpower impli- cations of projected levels of waste treatment facilities construction. This report was prepared in the Bureau's Division of Manpower and Occupa- tional Outlook by Michael R.. Crowley and Michael J. Pilot. Donald Eldridge and Marybeth MacNamee of the Division of Economic Growth developed the vari- ous expenditure models underlying this report, and contributed significantly to the analysis of the data. Joseph T. Finn of the Division of Technological Studies provided information on manpower requirement per unit of output. Within the Environmental Protection Agency. Arnold Hoffman of the Office of Planning and Evaluation provided general guidance. II. SUMMARY AttD cO~cLUSIO~S The level of expeditucles for sewage works construction activity implied or consistent with the Bureau's basic manpower and economic projections, or eco- nomic model, to 1980 is projected to increase by more than 159 percent over 1971 levels-from more than $2.7 billiOn (in 1971 prices) to nearly $6.9 billion in 1980.2 An alternative model was developed to reflect the goals set forth in the Water Pollution Control Act Amendments of 1972. Expenditures for con- struction of sewer plants and lines under this model were projected to rise Sharply between 1972 and 1976 from ~3.8 billion to ST.0 billion, dropping after- wards to a level of $5.7 billion by 19S0. LTnder another alternative model that reflects the Administration's desires regarding the release of appropriated monies for sewage works construction, sewer works construction expenditures are pro- jected to rise slowly from $3.6 billion in 1972 to a level of $4.5 billion in 1970,. and then accelerate thereafter to nearly $9.3 billion by 1OSO. In terms of manpower requirements (taking into account replacement as well as growth needs), the "Legislation" model w-ould generate nearly 9,000 open- ings annually over the 1971-76 period for construction craftsmen, two-fifths more than implied in the basic model and one and one-half times more than projected under the "Administration" model. Over the 1976-80 period, the number of openings would decline. In contrast, under the "Administration" model, about 45 percent fewer openings would be generated over the 1971-TO period than im- plied in the basic model. However, betw-een 1976 and 19S0, openings under the "Administration" model w-ould be more than four times greater than implied under the basic model. The four construction craftsmen occupations affected most by an increase iii the level of sewage construction are operating engineers, iron workers, cement and concrete finishers, and plumbers and pipefitters. The estimates of projected job openings for construction craftsmen derived from the basic and alternative models of sewer works construction activity have essentially the same implica- tions for training, i.e., output from formal training programs must be expanded if constraints on supply are to be avoided. From the standpoint of expanding supply, however, the "Administration" model is likely to be least disruptive of the alternative models since it would ljermit training authorities additional time to gear up whereas the "Legislation" model implies a need for a crash training effort during the earlier-period to meet peak 1976 needs which is followed by a severe relaxation in manpower requirements. 2 Details concerning the Bureau's "basic model" are presented in Section IX. 2 Although four alternative models ~ dcvelopeO-twn which follow the le'isiative intent and two which reflect the Administration's viewpoints-only two, one under each of these cases, were used however, in assessing manpower requirements~ PAGENO="0151" 145 Focusing on apprenticeship training, it is apparent that significant expansion in apprenticeship output in the plumbing and pipefitting trades must take place in order to maintain current ratios of apprenticeship completions to annual openings. Required apprenticeship expansion for operating engineers, iron workers, and cement finishers falls within a more attainable range. Fluctuations in demand for sewer systems appear to have had little impact on the movement of costs in this sector of construction. Costs, on the contrary, have tended to rise independently on changes in demand. An examination of se- lected other types of construction activity was made with the hcpe of providing some clues as to whether the anticipated sharply rising levels of demand for sewage works construction might result in an acceleration of cost increases. The results of this analysis were inconclusive and point up the need i~or additional study. The study also addressed another question posed by EPA, i.e., whether the con- struction industry is capable of meeting sewage works construction goals from a capacity standpoint. However, a general lack of data prohibited all but a very cursory examination-the results of which also were inconclusive. It is felt that a proper study of this aspect of concern to EPA would need to be preceded by a survey of individual contractors in order to (1) identify those who either specialize in or are capable of adapting all or part of their operations to sewer works construction, and (2) eliciting information from those who do not spe- cialize as to their capability to shift as well as to the conditions or inducements that would precipitate such a transfer. Senator MCCLURE. The second question is- Senator DOMENICI. Would the Senator yield? Senator MCCLURE. Yes. Senator DOMENICI. Where did the labor intensity figures conic from? Mr. TRAIN. The Bureau of Labor Statistics. I would point out that these projects, waste treatment projects, are very capital intensive as you know. Senator MCCLURE. One final question. A year ago, a little less, dealmg with the problems of safe water in this country, a report mdi- cated that chlorination of water supplies produced carcinogenic com- pounds which would indicate that the majority of our people, as a result of the treatment of water, are being exposed to carcinogenic compounds. Is there any further information that you caii shed on that and is further work being done in that field? PAGENO="0152" 146 Mr. TRAIN. There is a great deal of work being done in this field. I think that we have about a $7.8 mjlljon new program research in this overall area. Obviously we have had some ongoing research for a number of years. rfhe matter to which you refer, while it requires a good deal more work, does not mean that wherever chlorination is being used there is the exposure to carcinogens. Chlorine does combine with certain organic synthetic chemicals derived from industrial wastes to produce some carcmogens. These have been identified in some areas at very low levels. Tt is impossible at this point to draw any conclusions about health effects other than that any exposure to a carcinogen is to be avoided if it is i ea~,iL~ e. Senator MCCLURE. The amendment says specifically any must be prohibited. Mr. TRAIN. I couldn't; hear that. Senator McCLui~E. The amendment says any must be prohibited, if there are any carcirio~ens present that; cannot be cleared for ingestion foi human consumptioii. 1 am already over my time. I will not pursue it any further. Tl~ank you, Mr. Chairman. Senator GRAVEL [presidingi. Senator Hart. *SQnator HART. Thank you, Mr. Chairman. I will direct my questions and he as brief as I can to all members of the table. So anyone feel free to jump in. Senator Muskie asked a number of questions with regard to the rate of construction authoriza- tion and whether you would agree that it can be absorbed in the ~Ta,rious States and administered by your agency. I would like a~ general observation along the same line with regard to the rate of ou~ays, actual expenditures and beyond that perhaps xou would want to submit a more detailed statement later on. Do your same observations and statements apply to that as well in terms of the administration? Mr. TRAIN. Yes. I think tha t is generally true. Could you give those outlays, Mr. Aim? Mr. ALM. In fiscal year 1976 our total outlays for this program would be $2.3 billion. Senator HART. But in terms of the efficiency of the administration your abiht to administer those and the States to absorb them, I take it that you are equally confident as you were with Senator Muskie' s question about authorization? Mr. TRAIN. Yes. That is correct. Our main control is over the rate of obligation and, of course, the rate of outlay is ultimately dependent ~upon those obligations. We are endeavoring through our regional offices to expedite tile movement of funds that have been granted into the construction phase. It; is our intention to put a very high priority on this. This should in turn affect the rate of outlay. Senator HART. Do you feel that you have at the present time the manpower and resources or would you need additional manpower and resources to begin to develop, promulgate regulatory standards with regard to trucks and heavy duty vehicles in urban areas which I PAGENO="0153" 147 understand are also significant polluters and haven't been at the present time regulated sufficiently? Mr. ALM. We have asked for additional funding-a little, over 84 million and for some additional personnel for the noise program specifically to expedite the issuance of these regulations. Senator HART. It is not only noise, but emissions as well, engine emissions? Mr. ALM. That is correct. Senator HART. So you feel that you have the adequate resources for that now? Mr. ALM. I think that we are probably in good shape on this. Senator HART. Let me ask a brief question about your progress. on the high-altitude emission standards which is a fairly parochial concern of mine and my region. How are you progressing on those? What is ~7our timetable? Mr. STRELOW. Those have been issued. Those standards will actually take effect in model year 1977. Senator HART. That was my understanding as well, but Mr. Train. said we will add to the program the ability to certify automobiles.. This is certification- Mr. STRELOW. rfhat is the actual certification program itself,. people who will test those specially designed vehicles now. Senator HART.. What will be the. progress on that certification. capability? The same 1978-79? Mr. STRELOW. With the funds we expect in fiscal 1976 we will have the capability to do that additional somewhat special cert.ifica- tion workload. So that by either the 1978 or 1979 model year- Senator HART. You will have the certification? Mr. STRELOW. The cars on the roa.d being sold new in that year will be specially certified at high altitudes. Senator HART. Mr. Train, I continually get, and perhaps some of my colleagues as well, complaints from some rural areas when I meet with farmers and ranchers and so forth, that they constantly complain and moan about the EPA. 1 wish 1 could be more specific about their concerns. 1 suppose that the general complaint is that the standa.rds applying to their operations in water pollution is perhaps the main area. I just put that observation in for the record because 1 intend to t.ry to track.. down specifically what regulations they think a.re unrealistic in terms. of their operations. But I just wanted to make that observation because I continually get it from back home. 1\~Ir. TRAIN. I am aware of this concern, Senator. I think it is a. legitimate one under many circumstances. There a.re many small.. farming operations and regulatory requirements tend to be complex. These requirements often represent a Federal intrusion and for various. reasons are not looked upon very warmly. I think we do have to be sensitive to this. it is important that wA take the concerns, particularly of the small farmers-and 1 would add the small business man-very much into account when we develop our regulations. Insofar as the agricultural communities a.re concerned, 1 have recently added a consultant in my immediate staff, Mr. Gilford. PAGENO="0154" 148 Thornton, who was the Commissioner of Agriculture for the State of Tennessee until recently, to have the full-time responsibility of improving communications between EPA and the agricultural com- munity. We are working at this problem as best we can. If you could identify a specific problem, we would be glad to address them. Senator HART. I think it is the complexity of the regulations. the feeling of harassment. and they have to hire lawyers to figure out what the regulations are, and that sort of thing. I am talking about the individual farmers and ranchers, not the big operators. Thank you very much, Mr. Chairman. Senator GRAVEL. Senator IDomenici. Senator D0MENIcI. To follow on with a couple of specifics in that regard and then to change subjects, we forwarded complaints to your office regarding requirements that certain dairy farmers measure rain- fall and turn it in on some kind of forms. There is an airport that measures it within 2 or 3 miles and turns it in every clay to the weather bureau. We have told on that we thought it was rather ridiculous to be repetitious in that respect. I don't want to complain. I think those are the kind of things- Mr. TRAI~. You should. Senator D0MENICI. If you got that complaint and someone will be answering it like they answer it in my office. I want to ask you the question about the agricultural problem. I ~think when you were here for confirmation hearings, we asked you about your policy with reference to irrigation water going back into the water system and how you were going to develop the regulations. I understand that at that point you told us it was being discussed. There would be no changes i~i the policy until you had gone through and had hearings and found out more information. Is that correct? lYe are still at that pomt? Mr. AGEE. Senator, you are referring to our irrigation permit program. Senator DOMEXICT. Yes. Mr. AGEE. Yes. Our people have held a number of discussions on irrigation return with the agricultural community. As such we have not pu'suecl permitting irrigation return waters up to this point in time. lie still do not have the mechanism or. excuse me. the require- ments well established within our policies as to how we should write irrigation return permits. But we do have a continuing dialog with the irrigative agricultural community. Senator Do~rExIcI. So it is a fair summary that you have not changed any policy from the last time you appeared regarding the issuance of permits. gathering information? Mr. AGEE. Our policy is not changed; it is primarily an emphasis on gaining information about the pollution aspects and the control measures necessary. Senator Do~rExIcr. I want to change over for a minute with ref- erenc~e to the catalytic converter, Mr. Train. and especially as to Senator McClure's questions. First of alL by way of clarifying the record. I think the record would. clearly reflect that in November of the year prior to going with PAGENO="0155" 149 the change in the standards so that the catalytic converter would go onstrearn you testified that you already knew about the sulfate problem. I think that we should further clarify the record that the National Academy of Sciences followed you and indicated that they ~were aware of the problem. I think it is fair to say that both you and they said that they recommended it being permitted to be installed while the problem was studied because it could not have-considering the entire fleet of automobiles and the fact that we were going 1 year at a time with it-it could not have any effect that you could see that would counter- balance the cleanup of the air on the other side. I think it was not only you, but I think the record will reflect that the Academy did confirm that. It came more as a shock to me to find the stories very recently writing about it as if no one knew clear back then that it existed. You knew about it. I have two specific questions regarding it. It appears to me that the most important areas to study forthwith are the effect in closed areas, in the tunnels of this country where automobiles may be in large numbers, and inside of garages and build- ings where automobiles are going through with converters on them and ~with motors running, with high concentrations of the sulfates. is some specific study being made of that kind of an effect? Mr. TRAIN. I am certainly aware of that kind of exposure, assuming there is a problem, that would be a higher risk situation than exposure out in the open. I don't know that we have any direct research on the specific problem. We obviously do have laboratory work going on with animals directly exposed to hieth concentrations of catalytic exhausts which presumably would provide some extrapolation to the conditions you are describing. Senator DOMENICI. Is it safe to say then that the system you are developing to study that would certainly include these higher risk areas such as the ones I have described? Mr. TRAIN. The results of our research certainly would be highly relevant to these other situations. Senator DOMENICI. On scrubbers, we cortinue to talk. about it, but who is responsible to give the final repoi ~ on the scrubbers in the total R. & D. effort? is it your department or someone else? If so, to whom are you going to give it and when? Mr. TRAIN. The specific responsibility within the executive branch would lie with the Environmental Protection Agency. I don't know to whom, if to anyone, we are supposed to report. I would think this committee and your counterpart on the other sidle of the Hill would be the most appropriate focal points. Senator DOMENICI. When is it going to be put togcther, Mr. Train, in final form, and evaluation? Mr. TRAIN. I think that we will be fully r reparecl to discuss this matter with the committee at the hearings which you scheduled start- ing March 18. Senator DOMENICI. One last question, and I appreciate the chair- man's indulgence. With reference to the department that has been doing the monitoring work on the miles per gallon of gasoline for the internal combustion engine audi the various contentions of the auto- PAGENO="0156" 150 mobile industry, I assume you are still even under the reorganization and sending some of your R. & D. to ERDA. you are still going to monitor the truthfulness of the miles per gallon of the automobile industry; is that correct? Mr. TRAIN. Very definitely. We have our own program operated *out of our Ann Arbor laboratory for determining the fuel economy characteristics of all of the models that we test for certification pur- poses under the emissions program. Senator DO1VIENICI. Mr. Train, it has been my contention- Mr. TRAIN. The Federal Energy Administration has been handling the publication and distribution of these reports, but it has been our program in the sense of the testing, monitoring, and the development of the data. Senator DOMENICI. Have you not had a rather small effort in your department with reference' to not checking' the contentions-~-you described that to me-but checking into to see whether or not maxi- mum conservation effort is being made with reference to changes in the engine and its related systems? You have had something to do with that heretofore; is that correct? Mr. TRAIN. We have no very specific authority in this field. In our recent suspension hearings, we did include specifically fuel economy as one of the areas in which testimony was invited. We received testi- mony on the subject of fuel economy from all of tile manufacturers and others. We feel a ~Ter\T strong responsibility to include in the range of factors. to he considered in making judgments the issue of fuel economy. Senator DOMENICI. I am just going to close with one statement. I hope you will consider it. But I think we find ourselves somewhat in the clean air dilemma, that we find ourselves in today because we did iiot. set up a significantly strong scientific and tecimological resource to objectively evaluate. You were given pittance to do scientific evaiua- tion writh reference to the Clean Air Act. I submit that if you are part of making the decision with tile administration with reference to the automobile manufacturers saying that they will create a more conservation-inmded automobile on a voluntary basis with a suspension of certain rules, 1 submit we will be back in the same muddle unless the Federal Government insists on creating the laboratory, technological and scientific expertise, to monitor their progress on a partnership basis much as NASA does with the aerospace industry, so that 18 months into it when they say we have made these kinds of engmeering changes, they can submit them to an equally competent, technologically sound entity that says yes,. you have done all yOU can or you haven't. I think without it we are going to go through the 4 or 5 years and we are going to get contentions from the automobile industry that are objective because they did them with scientists and technologists, and we are going to have a rather meager effort on the part of Gov- ernment to objectively analyze whether or not they have done what they said or could have done more. \~,T0 will find ourselves with people who don't know yelling and hollering on both sides and no objective analysis forthcoming. I hope that someone in your department is looking into that. There are a few people around Congress saying the Government ought to PAGENO="0157" 151 get into it much as NASA did with jet engines so that we can analyza as people partners, technologically speaking and engineeringwise their progress, lack of it, or the truthfulness of their contentions. Mr. TRAIIN. Let me just make one quick comment. Obviously, we don't have the kind of facilities or resources which would in any way match those of industry in this area. But insofar as the voluntary fuel economy commitment by industry to the President is concerned, the Department of Transportation has set up a monitoring program to rmt least avoid some of the concerns ~OU mentioned. This monitoring program is now in effect. At least that aspect of your concern, I think, is recognized. Senator Do~nsNmcI. I don't wantto keep MIr. Train or the chairman. But I am aware of that monitoring system. They, too, are subject to our jurisdiction. 1 have seen the amount of money that they intend to spend. Itis going to be a monitoring system in the loosest sense of the word. It certainly is not going to have a laboratory capacity like Lewis Laboratory has in the aerospace industry where Rolls Roy ce and GE and Westinghouse come in there and lay the cards on the table and let engineers evaluate without any fear or trepidation of proprietary thievery and the like, arid they also analyze the economics with them. That is why we haven't had much confusion about changes in the jet engines. When they say this is all we can do, nobody has been coming over screaming and hollering that they ought to do more be- cause Lewis Labs and Langley Labs have the same capacity as Rolls Royce, Westinghouse and GE have. They come to a meeting of the minds on an equality basis, not with ~2OO million resources on the private sector and I think DOT's is less than $4~?2 million that they are going to use to monitor this 4-percent voluntary program. So I am kind of aware of it, but I am not talking about four scien- tists in a room talking about engineering capacity, scientific expertise, in a rather significant program. Senator GRAVEL. Thank you very much, Senator. MIr. Train, I will be very brief. I do appreciate your staying on. * it was reported in the Anchorage Daily Times on the 5th of February that the Environmental Protection Agency is opposed to accelerated offshore lease sales for oil and gas and has come out in total opposition to leases in the Gulf of Alaska. Is this an accurate report and, if so, what is the basis of this deter- mination by EPA? Mr. TRAIN. I think they must he referring to the Agency's comments with respect to the Department of interior's Environmental Impact Statement on the overall Outer Continental Shelf leasing program. The comments were that the time should be taken to insure that a good job is done. That is an oversimplification of the comments, obviously; they were very extensive. Senator GRAVEL. Could I interrupt you? What you are saying is you are not in total opposition? I think taking time to study and iotal opposition are two different things. * Mr. TRAIN. We have never opposed Outer Continental Shelf development as a matter of principle. It is my very strong view that we are going to have to utilize resources on the Outer Continental Shelf, but we ought to do a decent job. That is the basic thrust of our approach. In those comments we referred to the fact that the Council PAGENO="0158" 152 on Environmental Quality in its set of comparative priorities placed the Gulf of Alaska at the bottom because they felt it was the highest environmental risk at this time. We did not feel that this comment had been adequately addressed in the Interior analysis. Senator GRAVEL. Could I ask you to make public the specificity- of those comments? I read the CEQ report and I was astounded to find out that before going with the Outer Continental Shelf these technicians were telling us we ought to have a national oil company, a. Government-owned oil company. I found that to he totally inconsequent.ia.l to the technical problems involved. You are essentially saying tha.t CEQ said this, and now you have said this, and some of us would like to know publicly what the reasons are for the opposition. I don't know if you have had anybody from EPA fly over the North. Sea. Has anybody from the Environmental Protection Agency been. over the North Sea? Mi'. TRAIN. Yes. We have been in touch with t.he North Sea develop-. ments. We have also been in touch with the deepwater port develop- ment. Senator GRAVEL. Does EPA have any knowledge of any disasters. leakage or excessive pollutions in t.he North Sea? Mr. TRAIN. That 1 can't answer. I just don't know. Senator GRAVEL. I think it would be a. pretty fundamental ques-~ tion. After 3 years of experience in waters that are severe such as the. Atlantic Coast or the Gulf of Alaska., with no disasters, what would be so difficult to transfer that technology to the Gulf of Alaska? I just ask this as a layman-when I read reports that we have agencies. of Government that may be shooting from the hip and may not have the substance. So I am asking you, Mr. Train, t.o provide myself and the public~ with some specificity as to this kind of a statement. This may have Ii ~en erroneously reported in the press. I don't question that. If that is the case, I apologize ahead of time. But if it. is not, I would like some specificity as to why these views are held and upon what experience and some technology, so this can be made public. Would that be an unfair request? Mr. TRAIN Let ii'ie say the CEQ report was published some months. ago. I certainly will see to it that you have a copy. Our comments were published, as all of our comments are, and are available to the. public. I certainly will see that you have a copy. (See p. 163.) Senator GRAVEL. Take it as my oversight for not reading it. before. One other matter very briefly: The third largest community in. the State of Alaska is the community of Ketchikan. The pulp mill there says it is going t.o close down its operation on the 1st. of July if it has to comply with the standards of the 1972 Clean Water Standards Amendments and the regulations of EPA. This will put about 2,000 people directly and indirectly out of work. I think you know enough of economics to recognize that putting~ 2,000 people out of a population of 12,000 out of work would ab- solu tely decimate the entire community. The consultants that were hired by Ketchikan Pulp indicate to them that the compiny's treatment seems adequate. It is a questIon of degrees of clean water. Tl~ey already spent Sb million to try to PAGENO="0159" 153 meet standards. Now an additional $26 million is required. That changes the entire economics of the situation and so for that extra degree of water quality we would absolutely wipe out the third largest community in the State of Alaska. Obviously, I have great concern since I represent these people. I am sure that EPA has some concern. I would like to know if you could tell me why this community has had a gun put to its head in this regard and what steps are being taken to try to mitigate and work out a solution. Mr. `TRAIN. Mr. Johnson. Mr. JoHNsoN. I would be glad to answer that, Mr. Chairman. The Ketchikan Paper Co. was issued a permit under the 1972 act about 1 year ago, which required the same level of treatment as all other paper companies in the United States, to achieve secondary treatment levels. The company appealed that permit on the ground that it did not believe that level of treatment was warranted for its location and for its size. The appeal took approximately 1 year to resolve; and following an adjudicatory hearing up in Alaska, it was resolved about 3 months ago. The company agreed to install a level of treatment which was somewhat less than had originally been asked of it by the agency, but which was within the ball park of the. level of treatment being carried out at other mills in the United States. The company then proceeded to implement the construction schedule or begin to implement the construction schedule that was laid out. I believe it was only about a week ago that the company announced that due to changed financial circumstances which I don't question, but evidently as a result of some recent change they now found that they would be unable to accept the terms of the permit that had been issued to them. We have just recently learned after over a year of protracted litigation and apparent settlement that they are now going to be unable to carry out this level of treatment which for papermills \vould be the most lenient level of treatment that we have issued to any mill in the United States. `They have the right to come back and ask for a permit modification and to submit the information that they believe would warrant some even further exemption in their case. We will certainly listen to that. We are not shutting the door. It is an unfortunate situation, but as I say, there may be good reasons why tile new facts caused them to change their mind. Senator GRAVEL. But prior to enactment of th.e 1972 act, did they not install $10 million worth of equipment? Mr. JOHNSON. Sir, I believe that they did install some form of treatment prior to the passage of the 1972 law. But basically, the treatment they installed was vey minimal. It did not even reach the levels of primary treatment. `When the 1972 law was passed, of course, many, many other plants around the United States found themselves in the situation where they had expended some moneys, but they were being asked to go to tile much higher level of treatment as called for under the law. Senator GRAVEL. Do you know of any other communities that have been wiped out because plants have had to close, or is this just an PAGENO="0160" 154 unusual example? Is this a disaster that is unique to Alaska, or are there other similar situations resulting from implementation of the 1972 act in other parts of the country? Mr. JOHNSON. Senator, I don't know of any towns, to use your phrase, that have been wiped out. As we proceed through this economic crunch, we may find more plants like Ketchikan coming back, I am sure in the best of faith, and saying times have changed, now I can't do what I said I was going to do. To take papermills as an example, we have issued something in the order of 200 permits to major papermills. I am talking about the kind of company like Ketchikan which is the employer for that town. To the best of my knowledge, Ketc.hikan is the first case where this kind of wipeout of the entire employment has been raised. There were several plants which raised it originally but then dropped it at one point or another. Senator GRAVEL. We don't want to set a precedent in the nation of having such an economic disaster. I wonder if EPA could sit down with the company and ascertain the economics in question and the uniqueness of their location and try to develop a solution. Mr. JOHNSON. We will certainly sit down with them, Senator. As I indicated, they still have a right to come back and present the data. Senator GRAVEL. Would you report to me as a result of these negotiations directly, make sure that my office is aware? Mr. JOHNSON. Yes, sir. I will certainly doso. Senator GRAVEL. Thank you very much, Mr. Administrator. I apologize. Your luncheon crowd is probably still waiting for you. Mr. TRAIN. I would make one comment on this last question. The law doesn't permit a great deal of flexibility in terms of plant-by- plant economic differences. Senator GRAVEL. Mr. Administrator, I appreciate that statement. I wonder if you would he kind enough to help me serve my constitu- ency. If there is a need to make a change in the law, I would appreciate 3~our counseJ as to what the change should be. We must at least give human justice to these people. I know you don't want to just wipe out a town overnight. We want clean water. I voted for the Water Pollution Control Act Amendments. I think it is a fine law. I think you have a fine agency. But I think by the same token we don't want to go out with the gun and just wipe out a whole town and all the economics surrounding it. Mr. TRAIN. I can assure you we don't want to do that either. Senator GRAVEL. Thank you very much. [Comments from EPA relative to Outer Continental Shelf drilling and excerpts from the report of the Council on Environmental Quality entitled,"OCS Oil and Gas-An Environmental Assessment" follows :11 U.S. ENVIRONMENTAL PRoTEcTIoN AGENCY, Washington, D.C., February 11, 1975. Hon. ROGERS C. B. MORTON, Secretary of the Interior, Was hingtom, D.C. DEAR ba.: This is to clarify certain portions of the Environmental Protection Agency's (EPA) comments on January 10. 1975, concerning the Bureau of Land Managemeiit~s liraft environmental impact statement entitled. Proposed increase in Acreage to be Offered for Oil and Gas Leasing on the Outer Continental Shelf.' Specifically, I would like to address page 7. paragraph 3 of the detailed commants. EPA does nat meommend a two year delay in leasing tracts in the frontier PAGENO="0161" 155 areas on the Outer Continental Shelf. Our concern is with the development of the tracts after the leases have been let. Unfortunately, the drafting of this section of our comments failed to convey our intended meaning. The correct interpreta- tion of the comments has been transmitted to the Director, Bureau of Land Management (copy enclosed). If you have any questions concerning our clarification of these comments, please contact me. Sincerely yours, RUSSELL E. TRAIN. Enclosure. U.S. ENVIRONMENTAL PROTECTION AGENCY, Washington, D.C., February 7, 1975. Mr. CuaTIs J. BERKLUND, Director, Bureau of Land Managemeat, U.S. Department of the Interior, Washington, D.C. DRAR Mn. BERKLTJND: This is to clarify certain portions of the Environmental Protection Agency's (EPA) comments on January 10, 1975, concerning the Bureau of Land Management's draft environmental impact statement entitled, "Proposed Increase in Acreage to be Offered for Oil and Gas Leasing on the Outer Con- tinental Shelf." Specifically, we would like to address page 7, paragraph 3 of the detailed comments. EPA does not recommend a two year delay in leasing tracts in the frontier areas on the Outer Continental Shelf. Our concern is with the development of the tracts after the leases have been let. Unfortunately, the drafting of this section of our comments failed to convey our intended meaning. The correct interpreta- tion of the paragraph should be as follows: 3. Since eventual development of the subject leases may result in adverse secondary environmental impacts from the onshore facilities and their attendant support complexes, it is important to have the thinking of the affected states incorporated into the DO1 plans. Therefore, coastal states should be given a rea- sonable time to formulate their management programs to accommodate the demands of offshore development. The DOI should consider delaying its approval of oil development plans in frontier areas until states have completed and imple- mented their costal zone plans. Within two years most of the coastal states will have completed their plans, baseline studies of virgin areas will be completed and the development of frontier tracts could proceed with a reduced risk to the environment. EPA's recommendation, which has been discussed with members of your staff, is that Interior should increase its efforts to coordinate the Federal review of oil and gas development plans with the states which this development will affect. The states' coastal zone management plans are a particularly relevant mecha- nism for assessing the impacts in coastal waters and immediate onshore areas of oil and gas development. The Interior Department can be of real assistance to the states in terms of providing data developed through its environmental and resource review processes on the location and extent of offshore resources and probable location and extent of onshore facilities to develop those resources. We understand that plans in some states are in advanced stages of develop- ment. With the cooperation and help of the affected Federal agencies (including the Interior Department and ourselves), all coastal states should have their plans implemented in time to be of assistance in reviewing offshore oil and gas development and its related onshore impacts. If you have any questions concerning these comments, please contact me. Sincerely yours, SHELDON MEYERS, Direct&r, Office of Federal Activities. U.S. ENVIRONMENTAL PROTECTI~ AGENc~Y, Washington, D.C., January 10, 1975. Mr. CuRTIs J. BERKLUND, Director, Bureau of Land Management, U.S. Department of the Interior, Wash- ington, D.C. DEAR MR. BERKLUND: The Environmental Protection Agency has reviewed the draft environmental statement on the Proposed Increase in Acreage to be Offered for Oil and Gas Leasing on the Outer Continental Shelf. We acknowledge the 50-194 0 - 75 - 11 PAGENO="0162" 156 need to expand domestic energy supplies, and especially OCS oil and gas re- sources, however, the protection of the environment is of equal concern. The in- crease in OCS leasing and the means by which the OCS development is managed may be among the most critical energy decisions to be made in this decade, and while offering the possibility of significantly augmenting energy supplies, will likely bring profound social and economic changes to the coastal zone as well as serious long term impacts to the ocean environment. The evaluation of this proposal in an impact statement should be compre- hensive, thorough, and documented if it is to serve as a decision making docu- ment and a means of advising the public of the consequences of the action. While we are cognizant of the immensity of the task of examining the programmatic options relative to this proposal, we do not feel the statement succeeded in the analysis. Therefore, in accordance with the EPA rating system for environmental statements, we have classified this statement as Category 3. Inadequate. This statement has described the environmental consequences of OCS operations in general, but has not addressed key policy options and managerial issues pertain- ing to an accelerated OCS oil and gas leasing program. Of primary concern is the proposed increased figure of 10 million acres to be leased in 1975. (This, of course, implies a much larger offering than 10 million acres.) The impact statement fails to evaluate or justify the necessity for this size offering, and the need to simultaneously enter Atlantic and Alaskan virgin areas. Nor is any consideration given to data derived from Project Independence studies which seem to clearly refute the expediency of this size offering. There is no objective analysis given to the option of reducing the proposed acreage to be leased, or deferring the offering of various virgin areas. It is, furthermore, un- clear what role accelerated OCS leasing will play in the larger context of a na- tional energy policy, especially in relation to predicted oil and gas shortages that may occur in the next few years. The assumed necessity for such a large sale necessitates immediately offering sizable acreage in all of the frontier areas. The Council on Environmental Quality recommended in their April 1974 Assessment of OCS Oil and Gas Development that great care be taken in the development of frontier areas, and that the loca- tion and phasing of OCS leasing be designed to achieve energy supply objectives while minimizing environmental damage. This study documented the need for caution in development and assessed frontier areas in order of environmental risk. Some of these areas, especially the Gulf of Alaska, contain unique and vulnerable natural resources combined with significant natural hazards that would make precipitous development highly undesirable from an environmental standpoint. The accelerated development plan, as presented in the proposed schedule of 10 million acres, takes no cognizance of this assessment and further disregards the recommendations of the CEQ study. We feel that every effort should be made to phase leasing activity in frontier areas so that the most highly vulnerable areas will be protected from possibly irreversible adverse impacts of oil and gas development. This end would be well served by having the statement provide the rationale and environmental factors utilized in the selection of leas- ing areas. It would also be appropriate to provide the rationale for tract selec- tion within specific areas. Clearly, such a scrutiny of areas could delay the need to prematurely enter environmentally sensitive or hazardous areas. This strategy would also allow more leasing in areas that are better ecologically known, and thereby allow more adequate time for biological baseline studies in frontier areas. In this connection, we feel the environmental baseline work being done on various OCS areas should be completed and analyzed before development is per- mitted. It is impossible to adequately evaluate the total environmental scenario of any of the proposed leasing areas at this time, and the prediction of environ- mental consequences depends upon the compilation and analysis of adequate baseline data. The final statement should detail the environmental studies to develop the baseline on virgin areas. Likewise coastal management planning should be accelerated to prepare for the smooth integration of OCS induced coastal development. States adjacent to existing offshore development activity have incurred significant environmental, economic and social costs, with no mechanism for remuneration other than possible expansion of their own tax base. These direct costs, along with indirect effects of population shifts, employ- ment pattern alternation, increased demand on public services, and changes in land use should be thoroughly considered in advance of any future leasing dcci- PAGENO="0163" 157 sions. This was a concern also expressed by the Senate Committee on Commerce in their study of the Outer Continental Shelf Oil and Gas Development and the Coastal Zone. The statement should adequately address the critical interface of State and Federal planning that must precede OCS and OCS induced development. Finally, there seems to be substantial doubt as to the ability of the offshore industries to absorb the proposed accelerated schedule from the standpoint of available capital and available equipment. It is most unlikely considering cur- rent shortages of drilling rigs, manpower, and tubular goods, that the oil and gas industry could promptly develop all of the tracts leased, if in fact, there is sufficient industry interest and capital to lease 10 million acres. In the face of enormous capital requirements, the increased acreage may only serve to lower the level of competition in the bidding process and thereby lessen the opportunity of the public to achieve a fair market value. Further, discovery could be impeded because of the need to fragment exploratory efforts in leased areas. The attached material will provide further analysis of these issues and will offer for your consideration some related policy options. `We recommend this statement be revised to address the above issues and reflect recent policy developments. The statement should also be coordinated with and include a justification for the anticipated order of lease offerings as depicted in the November 1974 proposed schedule for leasing. We also recommend that the Department consider the preparation of area ElS's for all virgin areas to facil- itate the selection of areas amenable to resource development and to protect other environmentally sensitive areas. Such an EIS could be prepared independently or in conjunction with an EIS for the first lease sale in a virgin area. We appreciate the opportunity to have reviewed this statement and hope our comments will be of assistance to you. We will be happy to meet with you to discuss any of the issues raised in these comments. Sincerely yours, SHELDON MEYERS, Director, Office of Federal Activities. Attachment. SPECIFIC COMMENTS ON PROPOSED INCREASE IN ACREAGE To Bx OFFERED FOR OIL AND GAS LEASING ON THE OUTER CONTINENTAL SHELF A. PRACTICABILITY OF LEASING TEN MILLION ACRES IN 1975 1. Data from the Project Independence Blueprint (PIB) Task Force on Oil and Gas do not support the necessity for leasing ten million acres in one year under any scenario. Since the PIB Task Force on oil was led by DOT and used DOT data and personnel, there should be consistency between the conclusions reached by PIB, and those by DOT relative to the proposed action. In fact, it appears that the analysis and data in PTB did not in any way affect the policy decision to accelerate leasing. Furthermore, PTB data, both published and unpublished, show clearly that even under the most optimistic scenarios, insurmountable shortages of materials will constrain OCS development until at least 1980, since this is the earliest date by which exploration could be completed in any area. The following projections are based on data from the Oil Task Force and assume accelerated activity and high exploratory efficiency (40% greater than present exploration efficiency). Year when Area Acres leased (millions) exploration is complete Gulf of Mexico 3. 5 1980 South California Atlantic Alaska . 9 35 . 1 Total 10.0 1 After 1988. Source: Project Independence Oil Task Force, computer run T. II. b. PAGENO="0164" 158 2. The immediate and most important constraint on exploration will be avail- ability of mobile marine substructures for drilling rigs. Their production and use will pace exploration for the next several years, depending on their luck in find- ing oil and the efficiency of their use. At present there are 102 mobile substruc- tures available. In addition, if the government allocates materials to construct mobile substructures as quickly as possible and ensures that facilities are not exported, the demand for facilities and the number available will approximate the following: DEMAND AND SUPPLY FOR MOBILE STRUCTURES Rig years- 1975 1976 1977 1978 1979 1980 1981 1982 Assuming: Low exploratory efficiency: Demand 3, 296 3, 194 3, 017 Supply 102 177 262 High exploratory efficiency: Demand 2, 075 1, 973 1, 796 Supply 102 177 262 2, 755 2, 427 328 409 1, 534 1, 206 328 409 1, 921 1, 415 798 506 617 749 797 291 506 617 Million acres explored per year 3. THE MAXIMUM AMOUNT OF LAND PER YEAR THAT CAN BE EXPLORED IS: Assuming: 1. Low exploratory efficiency and business as usual supplyof material 0.3 0.4 0.6 2. High exploratory efficiency and business as usual supply of material .5 .7 .9 3. Low exploratory efficiency and ac- celerated supply of material .3 .5 .7 4. High exploratory efficiency and ac- celerated supply of material .5 .8 1.3 0.8 1.0 1.2 1.6 1.0 1.2 1.6 2.0 1.3 2.0 1.5 2.4 Sources: PIB MEC task force. P16 oil and gas task force, T. II. b-h. FIB co mputer run T. IV. a-e. Further data and the backup forthese tables are available. In summary, the PIB-data clearly refutes the underlying precepts of the pro- grammatic decision to lease OCS lands very rapidly. The justification for rapid leasing assumed that leasing was a constraint on resource exploitation; while PIB indicates that materials are the constraint. Furthermore, it was assumed that rapid leasing could target materials to the first major discoveries. PIB, how- ever, shows that development cannot be substantially accelerated even with the most fortuitous and efficient allocation of materials. EPA's position is, therefore, that DOT has not only failed to demonstrate that rapid leasing will free constraints, but on the contrary, the PIB data prove that the leasing rate has little bearing on the rate of development. B. INCLUSION OF ALASKAN OCS AREAS IN THE LEASING SCHEDULE 1. The CEQ Task Force on the OCS, in which DOl participated, states that the petroleum industry would encounter a higher environmental risk in the develop- ment of the Gulf of Alaska than in any other area. DOT has not been able to demonstrate that the benefit in oil development outweighs the environmental cost. In fact, DOT's own data, used by PIB, show conclusively that because of material constraints, there is no relative advantage to leasing Alaskan OCS areas at this time despite the magnitude of Alaska's reserves. EPA's position is there- fore that leasing in Alaskan waters should not be considered at this time and that substantial technical and biological research is required. Although we expect that as a result of that research, exploration and subsequent production will be feasible at some point in the future. EPA believes that the point cannot be pre- dicted at this time. In our opinion, it is therefore neither necessary nor prudent for Alaskan OCS areas to be placed on the leasing schedule at this time. We think that the future decision should be based on (1) baseline and biological effects research, most of which has not been funded or planned at this time, (2) coastal zone planning, and (3) assessment of operating experiences with advanced technologies which can be tested in other OCS areas. PAGENO="0165" 159 2. Exploration of the Gulf of Alaska is environmentally separable from re- source development. The programmatic EIS should be specific on this option in the case of the Gulf of Alaska because it may well be that the Guif should be explored to some extent but that development should await the results of biologi- cal and technical research, and cietailed land use planning. 3. Analysis of FIB data shows that although the estimated reserves in the Gulf of Alaska exceed those remaining in the Gult of Mexico by a tactor of 2.5, productivity of drilling equipment and investment is much lower than in the Gulf of Mexico. Barrels of oil recovered per foot drilleu are high in Alaska but be- cause of extensive expected down-time, primarily because of weather, produc- tivity in terms of oil produced per rig year, was estimated to be only 59% of the productivity of the Gulf of Mexico. (Source: FIB Oil and Gas Task Force (Jom- puter Ituns T. IV. and T. III) Issue A in this document used FIB data to show that the binding equipment constraint during the next few years would be mobile substructures for explor- atory drilling, in view of this constraint, it would be difficult to justify that early exploration of the Gulf of Alaska would be in the nation's best interest. 4. The FIB scenarios concluded that under some assumptions, extensive and/or rapid OCS development would result in a short period of time when there would be more oil produced than necessary to eliminate imports. For example, in 1985, at $11 per barrel prices, with accelerated development of resources and without an energy conservation policy, PIB calculated that: (1) the nation would not re- quire any imports of crude oil or refined products, (~) that enough oil would be produced to permit exports of 1.5 million barrels per day if there was no man- datory conservation program, (3) that exports would be much higher with con- servation, and (4) that Alaska and the West Coast would be producing almost three times as much oil as they consume (7,366,200 bbl of oil per day produced compared to 2,672,300 bbl of oil per day consumed). Clearly these estimates by FIB show that domestic production responds quite briskly to stimulation by prices at their present level for new oil, unless there are constraints in materials. The point is not that we don't need the oil but that an immoderate acceleration policy will be economically and environmentally costly, and will produce a brief spurt of self-sufficiency followed by another period of dependency. An assessment should be made of price effects and economic dis- locations due to this leasing schedule. 5. Under these conditions, DOT must demonstrate why production in the Gulf of Alaska is a wise policy in view of (1) CEQ's determination that production in the Gulf of Alaska is environmentally undesirable, (2) that use of critical materials, primarily mobile substructures, is comparatively inefficient in terms of daily barrels recovered in the Gulf of Alaska compared to the Gulf of Mexico, (3) that production in the Gulf of Alaska is economically more expensive than in the lower 48 OCS areas, and (4) that production by 1985 in the Gulf of Alaska can be surplus to the nation's need and should, at a minimum, be preserved for future years. 6. EPA realizes that Alaskan OCS reserves will and ought to be produced some- time in the future. The key point is that a few years' delay is required by ma- terial constraints, and ought to be taken advantage of by DOT. Some baseline inventory studies have been initiated but DOT has no biological effects or tech- nology studies uder way. EPA believes that the economic cost of having a lease sale delayed because of inadequate enviromental information far outweighs the costs of all pertinent studies. 7. Choices of technologies and operating procedures can substantially improve the viability of Alaskan OCS production. DOT should make an intensive study of technical alternatives which would reduce risks of Alaskan production and plan to test those technologies so that their reliability can be assessed in other less severe areas. Only after advanced technologies and biological studies have proven that the risk is worth the benefit should a sale be held. The program outlined below is aimed at understanding the effects of OCS development with the end result of providing mitigatory measures. These are research needs of a generic sense: they are not site specific. (1) There is some controversy over the persistence of oil in the marine en- vironment. Periodic release of hydrocarbons could have severe consequences; therefore, a high priority research need is to undertake a careful and intensive investigation to resolve this controversy. PAGENO="0166" 160 (2) The toxicity of crude oil is not well understood. Most studies have been conducted in the laboratory. Toxicity studies need to be undertaken which analyze toxicity over a wide range of variation in environmental parameters. (3) Studies need to be undertaken to understand how ecosystems recover from catastrophic damage, and how the new system differs from the original one. (4) Many parameters affect the functional dynamics of natural ecosystems. The interrelationships and interdependence between the open water of an estuary and the associated wetland are complicated and can vary in different parts of the country. Basic research should be undertaken to expand our knowledge of both the physical and biological parameters of estuaries and wetlands and their interrelationship in areas likely to be affected by OCS leasing. (5) Research should be undertaken to determine methods of spoil placement to improve the productivity of marshes and estuarine areas. Work is presently underway by the Corps of Engineers, but their work is only a beginning and needs to be expanded, preferably in cooperation with other Federal agencies. (6) Since most accidents are a result of human error, it might be worth con- sidering psychological studies of personnel who operate OCS rigs, in order to develop recommendations for the improvement of accident prevention training programs. D. COASTAL ZONE PLANNING 1. A major administrative problem has been the absence of consultation and coordination between DOl and the coastal states over the nomination, location, and siting of specific areas for lease. The DOl should encourage and support the early development of effective coastal zone management programs in states likely to be affected by OCS activities. All development of the OCS should be paced to minimize the risks of environmental damage and the disruption of the infrastructure of the impacted coastal areas. Adequate lead times between planning and implementation are essential to appropriately deal with onshore impacts. DOl has not demonstrated consideration of staging development for comprehensive coastal zone planning. The only major role played by States prior to 005 leasing is to exercise the right to comment on environmental impact statements. This means that the State's participation doesn't begin until after the DOl has decided when, where, and how much OCS acreage will be offered for sale. State officials are deeply concerned that the decision to lease 10 million acres was made without the benefit of public input from those who would be most affected. 2. The present pre-lease procedures do not provide adequate and timely acqui- sition of the necessary information for comprehensive state and local planning. DOl should accept the responsibility for adequately informing state and local governments as to coastal facilities and services likely to be needed in connec- tion with OCS activities. DOl should provide the coastal states with the follow- ing information to ensure responsible and timely planning efforts: A. Data regarding the location and magnitude of potential offshore oil and gas resources. B. Data and plans for OCS development, including estimates of the num- ber of types of facilities needed for production, refining and transportation. C. A projection of types and numbers of municipal facilities which will be required to service the population and industry to be impacted by OCS development. 3. Coastal states should be given a reasonable time to formulate their man- agement programs to accommodate the demands of offshore development. The DOl should delay its leasing for oil development in frontier areas until states have completed and implemented their costal zone plans. Within two years most of the coastal states will have completed their plans, baseline studies of virgin areas will be completed and the leasing of frontier tracts could proceed with a reduced risk to the environment. 4. Studies have shown that the states have incurred significant environmental, economic and social costs in the development of their offshore resources. While some costs and benefits should be examined on a national basis, coastal states would clearly realize a more equitable share of the benefits if they received additional revenues from the offshore petroleum industry. Federal OCS royalties are an appropriate source for funding aid to coastal states and alleviating on- shore impacts. Such a plan, rather than outright grants of fixed proportions of PAGENO="0167" 161 royalties to coastal states, is an appropriate method of dealing with this problem. The kinds of analysis expected to be undertaken under the Coastal Zone Man- agement Act of 1972 are precisely the kind of analysis which must be made if intelligent decisions are to be reached regarding OCS leasing. Realizing that such analysis will be forthcoming in two years, the burden of proof for immediate leasing in virgin areas must rest on those who would proceed with the present leasing schedule without the benefit of such analysis. E. QUALITY AND USEFULNESS OF EIS PREPARATION AND REVIEW As noted earlier, every effort should be made to design the OCS leasing pro- gram so that energy supply objectives are met with minimum environmental risk, and so that the most environmentally vulnerable areas will be protected from possible irreversible adverse impacts of oil and gas development. To this end, Ibis programmatic environmental statement should: 1. provide the rationale and environmental factors utilized in the selection of OCS areas to be leased (and in the selection of tracts within areas), and 2. detail the environmental studies to develop baseline information on virgin areas, and the means by which these studies will be used in the decision-making process on area and tract selection. EPA strongly encourages DOT to consider the preparation of environmental statements for each of the proposed OCS areas to be leased in order to assess the full impacts of oil and gas development within these areas. These statements would include the cumulative primary and secondary impacts of individual lease sales, including onshore impacts, identify those tracts where oil and gas develop- ment would have significant detrimental environmental impacts, and identify those tracts of resource potential conducive to safe development. Such statements could be prepared in conjunction with developing a leasing schedule for the area or accompany the first leasing sale in the area. The present programmatic environmental statement should also assess admin- istrative alternatives to the present ETS preparation system that would improve the usefulness of ETS preparation and review with respect to OCS oil and gas development. At present, tract nomination and selection are determined primarily by industry interest and hydrocarbon potential. It is our view that environmental considerations are not as yet a meaningful part of the area and tract selection processes. Further, impact statements prepared in connection with lease sales can often do little more than project very general consequences of operating plans. There is little information to predict cumulative impacts, location of pipeline corridors or onshore development. The present system, which ties exploration and develop. ment to a single leasing system, with the EIS process generally applied to the lease sale, can lead to the undesirable consequences that exploration is held up while development issues are debated, or the government's commitment to explo- ration (and subsequent development) proceeds through the leasing system with inadequate consideration of environmental consequences and mitigating alternatives. We request that consideration be given to the benefits of a dual EIS system and to the separation of exploration and development decision processes (to the extent that this is possible under existing law) in order to facilitate reasoned decision- making about oil and gas development and the means to avoid or mitigate adverse environmental effects. For example, an EIS prepared after tract nomination but before tract selection in finalized would focus on marine biological aspects and accomplish the early examination and screening of tracts that can be safely and profitably developed. To the extent possible within knowledge constraints, this statement would also evaluate development impacts. Subsequently, EPA, State and public review of development plans and operat- ing orders would be afforded and, if there were environmentally significant developments which had not been analyzed in the previous EIS, a developmental EIS would be submitted (perhaps cn a development unit basis). This second re- view process would allow fuller consideration of pipeline corridors, coastal development, induced development and related environmental effects than is pres- ently possible. Finally, we believe that legislative alternatives which would facilitate consider- ation of environmental factors in selecting and developing areas should be ad- dressed in the final statement. Several of these alternatives are listed below: PAGENO="0168" 162 1. Two Title system: Frontier OCS regions would be divided into large blocks. Companies would bid for exploration permits for one or more blocks. At two-year intervals, the permit holder would be required to forfeit a percentage of the block to government control. The permittee would retain sole production rights to the remaining acreage. 2. Ewploratory Leases with Preference Rights: Government would sell large areas to consortiums for exploration. Only exploratory lease holders would have the right to bid on developmental leases. Before production rights are granted, there would be a mandatory environmental analysis to determine if, and under what conditions, the leases could be produced. 3. Full Scale Governmental E~vploration: The government would contract with private companies to explore the OCS. Oil discoveries would be sold competitively as reserves in the ground, if an environmental analysis determines that energy benefits outweigh environmental costs. PAGENO="0169" 163 EXECUTIVE OFFICE OF THE PRESIDENT COUNCIL ON ENVIRONMENTAL QUALITY 722 JACKSON PLACE. N. 6. WASHINGTON. I). C. 20006 April 18, 1974 Dear Mr. President: In your Energy Message of April 18, 1973, you announced your decision to defer any drilling on the Atlantic Outer Con- tinental Shelf and in the Gulf of Alaska until a study of the environmental impact of oil and gas production in these areas could be carried out. You asked the Council on Environmental Quality to make this study in consultation with the Environmental Protection Agency, the National Academy of Sciences, other Federal agencies, and the Governors, legislators and citizens of the coastal states involved. The attached report, OCS Oil and Gas - An Environmental Assessmįp~, presents our findings. In carrying out your directive, we have reviewed environ- mental impacts in broad terms. The study focuses on a number of hypothetical drilling sites in areas considered by geologists to be particularly promising for oil and gas discovery. We have analyzed the potential impact on the marine environment of developing these sites, as well as the likely onshore impacts of industrialization and growth related to processing oil and gas. The report includes chapters assessing the technology of oil and gas production and the institutional and legal mechanisms for managing OCS development. The Council concluded that leasing and development under- taken in the Atlantic OCS or in the Gulf of Alaska should be guided by a set of essential principles stipulated in Chapter I of our report. By following these principles, and a number of specific recommendations, the Council believes that environ- mental risks can be minimized. We stand ready to work with the appropriate Federal agencies in implementing these recom- mendations. PAGENO="0170" 164 -2- The philosophy underlying our report is that the benefits of potential oil development must be balanced against the risks of environmental damage. When this balance is favorable, development should proceed with caution and with a commit- ment to minimize damage. When the balance is unfavorable, the Council believes that development should not move ahead until environmental risks can be lowered to an acceptable level. The Council's study found that the risk of environmental damage varies from area to area. Development of the Georges Bank and the Southern and Central Baltimore Canyon would involve relatively lower environmental risk than development in the Northern Baltimore Canyon, the Southeast Georgia Embayment, and the Gulf of Alaska - - all higher risk areas. The offshore oil and gas industry has made substantial progress in technology and work practices since the 1969 Santa Barbara blowout. In addition, more stringent Federal regulations for OCS operations have been issued and enforce- ment of these regulations has been strengthened. Over 17, 000 wells have now been drilled in waters off the United States coast. However, our report has found that operations in both frontier OCS regions would confront harsher conditions than have been previously faced in other United States offshore areas and that conditions in the Gulf of Alaska are more severe than the industry has yet experienced anywhere in the world. Potentially discoverable economically recoverable oil has been estimated from United States Geological Survey data to be 10 to 20 billion barrels in the Atlantic OCS and 3 to 6 billion barrels in the Gulf of Alaska. The figures for gas are 55 to 110 trillion cubic feet in the Atlantic and 15 to 30 trillion cubic feet in the Gulf of Alaska. Last year, from all sources, the United States consumed about 7 billion barrels of oil and about 24 trillion cubic feet of gas. A decision to move ahead with oil and gas development on the Atlantic OCS and in the Gulf of Alaska will call for close coordination of planning among Federal, state, and local governments. The creation of strong and expert coastal zone PAGENO="0171" 165 -3- management agencies in the states involved and thorough implementation of the National Environmental Policy Act will help to insure that the interests of the State governments and their citizens will be appropriately represented. In conducting this study the Council held public hearings in Washington, D. C., Alaska, and at various cities on the Atlantic coast. Representatives of environmental groups and of industry were consulted and kept advised of the studys progress. An advisory committee representing the Governors of each Atlantic coast state and Alaska was established and met on three occasions with the Council to review progress. Much of the research and information contained in the report was developed through contracts with universities and private consulting firms working with the Council and a number of Federal interagency working groups. Finally, a special panel of the National Academy of Sciences (NAS) performed a critique of our study which is attached to this report. The NAS panel's critique generally endorses the findings and recommendations of CEQ's report. Specifically, the panel commends the report as a useful first step toward the develop- ment of new Federal policies for resource development in these two OCS areas. The ` ~nel also concurs with the Council's recom- mendations for decreasing the risk of OCS operations and for minimizing onshore impacts through strengthened regulations for OCS technology and through improved coordination among governmental agencies. The panel agreed with the assessment that OCS operations in the Gulf of Alaska would present the highest environmental risk, but took exception to the Council's ranking of regions in the Atlantic OCS. The panel expressed the belief that the criteria used in making the rankings were inadequate and incomplete and that other criteria should be considered. The Council believes that consideration of the other criteria mentioned by the NAS panel would not have changed the relative order of ranking. In fact, the effect of oil on the offshore marine environment was considered to the extent possible, as were the alternative uses of the OCS. PAGENO="0172" 166 -4-- Other issues raised by the NAS critique, such as an expanded involvement of the Federal Government in oil and gas exploration, the relationship of this study to Project Independence, and national policy on annual energy growth rates, are clearly outside of the scope of the assignment covered by this study. The Council will continue, of course, to work with the Department of the Interior, the Federal Energy Office and other Federal agencies on the role of OCS oil and gas resources and other factors in our national enuigy policy. We hope that our report satisfactorily provides the study of environmental impact you requested to help assess the future course of action on the OCS. Respectfully, ~ Russell W. eterson, Chairman John usterud, embe Beatrice E. Willard, Member The President The White House Washington, D.C. 20500 PAGENO="0173" 167 PREFACE On April 18, 1973, the President asked the Council on Environmental Quality to work with the Environmental Protection Agency, in consultation with the National Academy of Sciences and other Federal agencies, to study the environmental impact of oil and gas production on the Atlantic outer continental shelf and in the Gulf of Alaska. The President also specified that Governors, legislators, and citizens of these areas should be consulted. This report summarizes information and analyses provided to the Council by many sources over the year of study. Federal interagency working groups were formed to develop the scope of work and to monitor the progress of the study. Federal agency representatives who contributed to the study are listed in Appendix A. Contracts were awarded to consultants and universities to study specific subject areas (they are listed in Appendix B). A Governors' Advisory Committee, consisting of one designee from each Atlantic coast state and from Alaska, served in a consul- tative and review capacity (see Appendix C for members' names). In accord with the President's request, the National Academy of Sciences independently analyzed the Council report. The Academy's critique is attached. The Council involved the public directly in this study. In September and October of 1973, the Council held public hearings and briefings to gather information from citizens, environmental groups, industry, and government officials. Hearings were held in Washington, D.C.; Boston, Wass.; Mineola, Long Island, N.Y.; Philadelphia, Pa.; Ocean City. Md.; Jacksonville, Fla.; and Anchorage. Alaska. A summary of these hearings and a transcript of the Washington. D.C., hearing are being published separately. The Council gratefully acknowledges the efforts of Federal agencies, state and local governments, contractors, industry representatives, and members of ei-rironmontal and public interest organizations who have contributed to this report. Special thanks go to the members of the Governors' Advisory Committee and the National Academy of Sciences review committee who generously contributed their advice and time. Washinqten, D.C. April 1974 PAGENO="0174" 168 CHAPTER 1 SUMMARY OF FINDINGS AND RECOMMENDATIONS This is a report about energy development and the environment. It was prepared by the Council on Environmental Quality in response to the President's April 18. 1973, request to "study the environmental impact of oil and gas pro- duction on the Atlantic Outer Continental Shelf and in the Gulf of Alaska." [11 This report, and the studies that contribute to it, take on great importance in view of the pressures of the energy crisis and the drive toward self-sufficiency. In his January 23. 1974, Energy Message, for example, the President directed the Secretary of the Interior to triple leasing originally planned on the OCS to 10 million acres in 1975. However, recognizing the complex environmental issues involved, he reiterated his commitment that leasing on the Atlantic OCS and in the Gulf of Alaska would not go forward pending the results of thi's study. This report presents the results. It squarely faces the issues of energy development and environmental protection. And it concludes that these objectives are not mutually exclusive. It does not give the drillersa green light. Nor does it call for a freeze on development. Instead, it assesses the relative environmental vulnerabilities of the areas studied and recommends procedures. requirements, and stipulations for protection and for development. The recommendations attempt to provide environmental guidance on alternative OCS development decisions. PAGENO="0175" 169 1-2 The report establishes an agenda for action to improve OCS technology, tighten regulation and enforcement of OCS operatbns, and untangle the bewildering web of institutional interests between the states and the Federal Government and among the Federal agencies. It provides information and methods of analysis that should be useful to the oepartment of the Interior and other Federal agencies in considering environmental aspects when determining those sites to hold back from lease sale and those to offer for lease nnd in integrating environmental factors into the design of an optimum leasing schedule. The data and methodology provided here will also help states and localities to anticipate and plan for the onshore impacts of OCS development. And,of course, it will aid in preparing environmental impact statements for individual lease the St~4y_ This study assesses the potential environmental impacts of oil and gas development on the Atlantic and Gulf of Alaska outer continental shelves: Chapter 2, Oil and Gas Resources, examines estimates of potential oil and gas resources in the Atlantic and Gulf of Alaska. Chapter 3, perspectives on Energy Growth,prOjects potential energy needs and evaluates the environmental impacts of fuels that can be used to meet these needs. Chapter 4, TechnoloGy for oeveloping Oil and Gas Resources Offshore, reviews the basic steps of offshore oil and gas exploration and presents estimates of oil spill probabilities. PAGENO="0176" 170 1-3 Chapter 5, Natural Phenomena and OCS Development, explores the unusual physical conditions facing operations in the Atlantic and in Alaska. Chapter 6, Offshore Effects of OCS Development, concentrates on the environmental impact of operations in the ocean, on the shelf, and along the coast resulting from the exploration, production, and transporta- tion of oil and gas. Chapter 7, Onshore Effects of OCS Development, analyzes the economic, social, and environmental impacts of onshore development -- oil refining, gas processing, petrochemical manufacturing, and support services -- induced by development offshore, Chapter 8, Technology and Environmental Protection, examines the extent to which oil and gas exploration and production technology and practices protect the environment, Chapter 9, Institutional and Legal Mechanisms for Managing OCS Development, looks into the effectiveness of Federal regulatory and enforcement processes and the broader issues of government coordination and planning. Witnesses at the Council's public hearings on OCS development suggested many areas of study oriented toward modifying the current OCS management system. Proposals ranged from fundamentally changing the roles of government and industry in developing resources on public lands to alternative methods of bidding on OCS leases. They included suggestions to set up a public corporation for oil and gas exploration and development in new OCS areas, to authorize the U.S. Geological Survey or a public corporation to conduct all exploratory drilling, to adopt a new leasing system based on royalty bidding rather than on bonus bidding, and to establish an exploration leasing system which would precede issuance of development leases. PAGENO="0177" 171 1-4 While these and other such proposals merit consideration within the context of an evolving national energy policy, they involve extremely complex technical and financial issues not directly related to the environmental impacts of OCS oil and gas operations and thus do not fall within the scope of this study. For similar reasons, this report does not include economic analyses of alternative OCS management arrangements or of alternative energy supplies. Background The Outer Continental Shelf Lands Act of 1953 12) is the basic charter governing exoloration for the develooment of the minerals and other resources under the OCS. In essence, it is a statute designed to promote development, enacted well before the major environmental legislation of the past few years: the National Environmental Policy Act of 1969 (NEPA) 131 and three 1972 laws -- the Coastal Zone Management Act, ral the Federal Water Pollution Control Act Amendments, 191 and the Marine Protection, Research and Sanctuaries Act. 161 This new legislation has in effect "amended" the OCS Lands Act by requiring incorporation of more stringent environmental values and needs in its administration. Oil and gas development on the Gulf of Mexico and California OCS began with exploration in shallow state waters nearshore. The first offshore plat- form was constructed in 1897 of f Santa Barbara . Fifty years later, the first platform out of siqht of land began operating off Louisiana. Today's multibillion dollar offshore oil industry was well established before the Federal Government began selling leases on the Gulf of Mexico OCS nearly 20 years ago. Since then the industry has grown dramatically, advancing into deeper waters. Until recently Federal supervision was 50-194 0 - 75 - 12 PAGENO="0178" 172 1-5 primarily concerned with volume of resources produced and operation of leases;from 1954 to 1968, over 7,300 w3lls were started on the OCS. In 1969, however, the blowout of a Union Oil Company platform in the Santa Barbara Channel focused national attention on the hazards of offshore operations. Subsequent accidents accompanied by fires in the Gulf of Mexico underscored questions about the adequacy of OCS technology and practices. Since then, more stringent Federal regulations for OCS operations have been issued and the Federal enforcement effort has been strengthened. However, environmental groups and individual citizens continue to express concern, not only about massive oil spills and fires, but also about discharges of oily water, drilling mud, and drill cuttings -- the housekeeping' operations of an offshore facility -- and about the changes that result on land frc industrial and other development generated to support offshore drilling operations. As CEQ heard time and again at the public hearings, particularly along the Atlantic, the public is concerned about the overall impact of offshore oil production on the oceans, beaches, and wetlands and on the shoreside communities where the oil is landed and processed or which serve as bases for servicing offshore operations. Statement of Principles Whether to open specific frontier areas in the Atlantic and Gulf of Alaska OCS is a critical public policy issue because of the importance of these resources to our Nation's energy needs, the possible risk of damage to the environment, and the potential impact on the economy and social structure of communities onshore resulting from construction of refineries and other support facilities. Such an issue must be approached with caution, intelligence, and judgment. On the basis of its year-long study, the Council on Environmental Quality has concluded that leasing undertaken in these waters must be conducted under PAGENO="0179" 173 1-6 carefully stipulated and controlled conditions, ad that t~ii Feder~i government ust be guided by and committed to the following principles in choosing areas to lease and in administering environmentally safe offshore operations: Exploration and development of the OCS must take place under a policy which puts very high priority on environmental protection. The location and phasing of OCS leasing should be designed to achieve the energy supply objectives of the leasing program at minimum environmental risk. The best commercially available technology must be used to minimize environmental risks in new OCS areas. Regulatory authorities available to Federal agencies must be fully implemented and requirements strictly enforced to minimize environ- mental risks in new OCS areas. planning at all phases of OCS oil and gas operations must respect the dynamic relationship between initial Federal leasing decisions and subsequent state and local community action. The states and the communities affected must be given complete information as early as possible so that planning can precede and channel the inevitable development pressures. Experience must be continuously integrated into the management process. The interested public must be given the opportunity to participate and play a major advisory role in the Federal management and regulation of the OCS. These principles, if applied consistently by responsible government and industry decisionmakers at all stages of the development of new OCS areas PAGENO="0180" 174 1-7 for oil and gas, will provide the basis for policies and programs that can significantly reduce risk to every element of the environment. oevelopment of OCS oil and gas in accordance with these principles poses major challenges to Federal management and regulatory agencies, to the states affected by the offshore activities, and to the oil industry. Risk of damage to the human and natur~l environment is an inseparable part of almost any development, including the OCS. The guiding principles must be to keep risks at an acceptable level and to balance risks with benefits. When a risk -- based on the current state of knowledge and technology -- appears to outweigh that of an available alternative for meeting the same objectives, we should not move ahead until we know more and can do better. When the risk is acceptable, we should proceed with caution and with a commitment to prevent or minimize damage. This means that the oil industry must have adequate technology and must use it safely, that Federal agencies must exercise their management and regulatory responsibilities to ensure that the oil industry meets its obligations, and that Federal, state, and local agencies must coordinate their efforts to minimize disruption of coastal communities and environments by those facilities and o~her development required to support offshore operations. Major Findings and Recommendations This section presents the major findings and recommendations of the Council study. Relative Ranking of Environmental Risk of OCS Areas In the April 18, 1973, Energy Message announcing this study, the president said that `[nb drilling will be undertaken.. .until its environmental impact is determined." Thus the major questions that the Council attempts to answer PAGENO="0181" 175 1-8 here are: What are the relative risks of development in these OCS areas? What can be done to reduce these risks? In what ways is our knowledge too little to answer these questions? To provide a framework for answering these questions,CEQ identified 23 hypothetical locations of potential oil and gas accumulations in the Atlantic OCS and in the Gulf of Alaska and 8 sample onshore areas where the induced industrial development trom oil and gas production could occur. For the Atlantic, four resource locations were identified in the Georges Bank Trough off New England. five locations in the Baltimore Canyon Trough off the Middle Atlantic. and five locations in the Southeast Georgia Embayment off the coast from northern Florida to South Carolina. The sample onshore sites studied were Bristol County. Mass. Cumberland/Cape May Counties, N.J. Charleston, S.C.: and Jacksonville, Pta. (sea FiguP 1-1). For the Gulf of Alaska, nine resource locations were identified, and potenttal onshore effects were examined at Cordova and Valdez and in the Puget Sound and San Francisco Bay areas (see Figure 1-2). Chapter 2 discusses in detail the methodology for selecting these hypothetical resource locations, and Chapter 7 deals with the sample onshore site selections. The Council believes that the following order of relative environmental risk applies to development of the Atlantic and Alaskan outer continental shelves: Lowest Risk Eastern Georges Sank (East of Ģ8 W; EDS 1 and 2( Southern Baltimore Canyon (South of 37 N EDS 9) Western Georges Bank (West of 68 W; EDS 3 and 4) Central Baltimore Canyon (Between 37 and 39,5 N; EDS 6, 7, and 8) Northern Baltimore Canyon (North of 39,5 N; EDS 5) Southeast Georgia Embayment(EDS 10, 11, 12, 13, and 14) Western Gulf of Alaska (West of 150 W; ADS 7, 8, and 9) Highest Risk Eastern Gulf of Alaska (East of 150 W; ADS 1, 2, 3, 4, 5, and 6). PAGENO="0182" 176 1-9 SOUTH CAROLINA/FLORIDA Nassau St. Johns Duval Clay Baker (~\ Hypothetical ~ Drilling Sites GEO~G~ MASSACHUSETTS! RHODE ISLAND Bristol SOUTH CAROLINA/GEORGIA Berkeley Dorchester Charleston Assumptions REGION Locality Figure 1.1. Atlantic Hypothetical Drilling Sites and Hypothetical Onshore Development Areas PAGENO="0183" SmttE H 0 ~1 CALIFORNIA CevGa Cmtv REGION Lvvality O HypvthGiv& DAIIivg Nitn~ Figure 1-2. Gulf of Alaska Hypothetical Drilling Sites and Alaska! West Coast Hypothetical Onshore Development Areas PAGENO="0184" 178 1-il This ranking represents CEQ's best estimate of the overall relative degree of risk to the marine, coastal, and human environment resulting from OCS oil and gas development. of course, the rcsk must be bklãnced against the value and benefits of the oil and gas to be recovered. The ranking is based on an assessment and integration of the findings of this study with respect to the effects of development onshore as well as of oil spills offshore, the incidence of unusual phenomena in potential development areas, the state of technology, and projections of regional energy needs. CEQ believes that high environmental risk is involved in the development of the Northern Baltimore canyon, the Southeast Georgia Embayment, and the Gulf of Alaska. Less risk would face development of the central and Southern Baltimore canyon and Georges Bank. The risk of damage from offshore operations can be decreased by strict requirements for environmentally protective technology and improved practices. The timing, magnitude, and location of onshore development must be controlled by state and local land use plans and regulations. Studies of oil spill probabilities show that the size range of individual spills is extremely large, from a fraction of a barrel to over 150,000 barrels, although most spills are at the low end of the range. For example, three spills each year accounted for two-thirds of all the oil spilled from 1970 and 1972. Amounts can vary by a factor of 1 million, and a single large spill distorts the statistical distribution of spill magnitudes. For an oil field find of medium size (2 billion barrels in place), there is about a 71 percent chance that at least one platform spill over 1,000 barrels will occur during the life of the field; for a small oil field find (500 million barrels in place), the chance is about 25 percent. If a large platform spill does occur, there is an 80 percent chance that it will exceed 2.380 barrels and a 35 percent chance that it will exceed 23.810 barrels. PAGENO="0185" 179 1-12 It should be noted that in view of the lack of scientific data on the effects of oil spills and discharges on offshore fisheries, the Council's ranking of offshore damages relies heavily on the probability of oil spills impacting biologically productive coastal wetlands and estuaries and intensively used recreational beaches. This does not mean that oil spills do not cause damage enroute to shore or at sea. It simply reflects the fact that we know something about the effectxof oil on wetlands and beaches but considerably less about its effect on the offshore marine environment. Indeed, for many Atlantic areas and perticularly for Gulf of Alaska areas, there is a scarcity of information on which to base projections of the imuacts of oil on cost earine life. Carefully designed baseiia~ ~vironmental studies should be initiated immediately in potential leasing areas and should be an essential and continuing part of OCS management. Such studies should be closely monitored and coordinated so that information can be integrated into ongoing operations and the results applied to decisions on leasing and regulating new areas. Special attention should be focused on determining long-term or synergistic effects of oil and other pollutants, if any, on marine organisms so that corrective actions can be taken as soon as possible. Georges Bank. In the Gecr~es Bank, the thick section of sediments with the greater likelihood of oil and gas accumulation lies farther from shore than in any of the other OCS areas considered. Should oil spills occur, the probabilities of oil reaching shore from hypothetical drilling sites located in the eastern part of the Bank (EnS 1 and 2) are generally low -- a maximum of 15 to 20 percent in the spring and near zero in the winter (see Table 1-1). The average time required for the oil to reach shore from these sites ranges from 80 to 150 days, with oil from the more remote site (EDS 1) taking the longest time. This is important because oil that has been exposed to long periods at sea, i.e., that is weathered, is less toxic than freshly spilled oil. Even if such oil should come ashore, it is less likely to damage organisms severely in the biologically fragile nearshore and estuarine areas. PAGENO="0186" 180 1- 13 TABLE 1-1 Probabilities of Oil Spills Coming Ashore from Hypo- thetical Drilling Sites Hypothetical Percent ashore Percent ashore spill site worst season best season Atlantic Coast EDS1 15 NearO EDS2 20 NearO EDS3 35 NearO EDS4 50 5-10 EDS5 10 NearO EDS6 20 0-5 EDS7 20 5 EDS 8 20 0-5 EDS9 NearS NearS EDS1O 95 NearO EDO 11 95-100 5 EDS12 90 15 EDO 13 50 NearO Golf of Alaska ADO1 95 40 ADS2 95-100 75 ADS3 95-100 55 ADO4 95-100 55 ADS5 95 60 ADS6 95-tOO 60 ADO7 45 5 ADS8 5 0-5 ADS 9 5-10 NearS Oource: The Massachusetts lrstitute of Techrolony Depart- ment of Ocean Engineering. 1974, "Oil Op111 Trajectory Studies for Aflanfic Coast and Gulf of Alaska," prepared foe the Council on Eouironeeeetal Duality under contract No. EDC33O. PAGENO="0187" 181 1-14 In the western part of the Bank EDS 3 and 4), werr tte or: aoj.ljt; of a spr or : .1 sr~ll or discharge reaching store os 35 to 50 percent and the average time to shore ranges from 40 to 120 days, the physical persistence of oil on the rocky shores of New England would, in general, be less damaging than in the salt marshes and wetlands of the Middle and South Atlantic. Little is known about the potential biological impacts of oil spills and discharges to fisheries on the Bank itself. These fisheries, however, are valuable : or:: to orotecred by stringent cnnzrols on d~schar~es. Analysis of the onshore effects of OCS development in the Georges Bank indicates that there would be significant net economic benefits to New England. Heavily dependent on oil and natural gas, New England could possibly obtain 30 percent of its crude oil and 70 percent of its natural gas requi rements from the Bank by 1985, assuming medium energy demand growth and average Georges Bank production estimates. The Council believes that economic activity induced onshore by offshore oil and gas operations would not unmanageably burden the socioeconomic structure or the natural environment. Locally, up to 19.000 new jobs could be created by 1985 (see Table l-2(;regionally, employment could increase 1 to 3 percent and economic output, largely from refining, could increase 1 to 5 percent. Local impacts on land use and social and physical systems due to refinery siting could be severe, although regional impacts would be slight. Adverse impacts could be lessened by directing onshore development activities toward the older cities, like Fall River and New Bedford which need economic stimulants, and away from smaller towns whose social and physical structure could be overwhelmed by large-scale development. Increases in both air and water pollutants can be expected in local areas, even assuming best available control technology, and care must be taken that ambient standards are not violated. The time required for oil to come ashore from these central sites is from 2 to 3 months on the average, with minimum times in the range of 46 days. There appears to be little seasonal dependence in the time to shore, although the probability of impacting asnore ir stronoly season dependent. PAGENO="0188" TABLE 1-2 Summary of Onshore Impacts, East Coast: High Development' Key impacts New England 2000 1985 2000 Local Regien Lecal Reg%on 1985 Leca) Region Level Region Primary impacts Number of offshere platforms (25,000 barrels per dayl Number ef refirrry equivalents (200,000 barrels per dayl Number ef gas processing plants 1500 millien cubic feet per day) Number ef petrochemical ceneplen equivalents (1 billion pounds per year olefirs) Value of incremental construction (millions of 1970 dollars) Aggrrgate impacts Employment (thousands) Population (thousands) Acrnage required (thousands) Hydrocarbon loadings (thousand tons per ynar( Biological ooygen demand (million lens per year( One footnote at end of table. 38 38 68 68 5.6 1.4 2.8 2.8 8 2 2 0 0.5 0.8 2.4 155 intl 387 79 83.1 10.0 (9) 43.6 (9) 7.0 18-0) 76.7 (3) 188.8 (3) 24.3 13) 17.3 (7) 38.8 (7) 8.0 (9) (3) 191.7 (3) 26.9 (3) 71.9 16.6 (502) 36.6 (6-8) 34.6 (1116) 1.8 (87134) 5.7 0.9 (14) 3.2 (5) (23) (6) 38 38 1.9 4.2 2 2 1.0 2.2 118 332 28.8 100.2 (19.30) (2) 59.6 227.0 (19-27) (2) 32.4 49.3 (18.26) (4) 27.3 57.3 (41273) (714) 1.6 4.3 (29-88) 14) 68 2.8 1.9 31.9 (20-29) 66.0 119-26) 118-251 40.2 (4 1-338) 2.4 (30-104) H 68 H 01 7.2 8 6.0 84 120.8 (2) 268.6 (2) 57.0 14) 103.6 (11-27) 7.8 (6) PAGENO="0189" TABLE 1 -2-Continued Summary of Onshore Impacts, East Coast: High Development' Key mpacts Sooth Atlantic/Charleston Sooth Atlantic/Jacksonuil(e t985 2000 t985 2000 Local Region Local Region Local Region Local Region 38 1.4 38 2.8 Primary impacts Number of offshore platforms (25000 barrels per day) Namber of refinery eqoioalents 200,000 barrels per day) Number of gas processing plants 1500 rni()ioe cobic feet per day) Number of petrochemical cornpleu rqu:ualents (1 billion pounds per year defies) Value of ncnemevtal covstruct~on of 1970 do)lars) Aggregate impacts Employment (thousands) Population thousands) Acreage required (thousands) Hydrocarbon loadings (thousand tons per year Biological ocygee demand rn/lion tons per year) 68 68 2.8 5.6 4 8 4.2 7.4 91 162 75.8 109.9 (28-38) 20-25) 145.4 272.9 (24-31) 20-25) 29.6 75.4 (23-29) 17-20) 47.6 94.9 11-24) 62-175) 4.3 to_B (81-120) 37-60) 1.2 2.4 228 405 59.2 87.9 29-41) 19-24) 137.5 250.8 (27-34) (20-25) 26.0 64.6 124-29) (16-18) 24.5 48.4 75-150) (44-itt) 2.1 5.6 (53-78) (28-44) 38 38 1.4 1.4 2 2 0 0 271 434 37.0 53.9 9-10) (11-12) 82.3 142.8 )9) 112-13) 25.4 43.2 )7-8) 19-to) 17.6 21.2 (73-149) (43-64) 2.8 3.8 13-15) (15-17) 68 68 2.8 4.2 4 B H 4.2 5.8 108 174 58.7 84.6 (12-13) 14-16) 111.2 202.4 110) 115-16) 33.3 64.9 (8-9) 11-14) 43.2 71.8 Iii 1-294) (73-156) 8.1 11.7 25-31) 28-38) `All imports are nuer base case conditions. The numbers in parentheses represent percentages over base case conditions, the first over Base Case 2 and the second over Base Case 1; where there is only one no mber, the percentage increase is the same for either base case. See Chapter 7 for a detailed description of cases and impacts. Source: Resource Planning Associates, Inc., and David M. Dornbusch & Co., 1974, "Potential Onshore Effects of Oil and Gas Production on the Atlantic and Gulf a) Alaska Outer Continental Shelf," prepared for the Council on Enoiroementa) Duality under contract No. EO4ACOO2. PAGENO="0190" 184 1-17 Baltimore Canyon. In the Baltimore Canyon, the thickest sections of sediments parallel the coast 50 to 75 miles out. Should oil spills occur, the probability of their reaching shore from hypothetical drilling sites in the central part of the region (EDS 6 to 8) is generally small, although slightly higher than from EDS 1 and 2 in the Georges Bank. The maximum probability for EDS 6 to 8 is 20 to 25 percent in the spring; during the winter the probability is 0 to 5 percent. At the northern end of the Baltimore Canyon,the movement of oil spills from hypothetical drilling sites is markedly different. Although there is only a 10 percent chance that oil spilled 50 miles south of Lone Island (EDS 5) would come ashore on Long Island during the spring, this probability increases dramatically as the hypothetical oil release point moves north toward Long Island. Oil released 25 miles south of Long Island in the spring would come ashore 75 percent of the time; oil released 10 miles south would come ashore 95 to 100 percent of the time during that season. The probabilities are considerably lower in The potential sites in the Baltimore Canyon are near coastal wetlands and salt marshes which are biologically valuable and serve as prime nesting and feeding areas for waterfowl. Oil reaching these salt marshes would persist in marsh biota and fine sediments for a number of years. In addition, oil spills in the northern part of Baltimore canyon would tend to beach in northern New Jersey and Long Island. impacting some of the Nation'smost intensively used recreational areas. PAGENO="0191" 185 1-18 The northern part of the Middle Atlantic region is one of the cost densely populated and industrialized areas in the country. This region contains nearly all of the 1.6 million barrels per day refining capacity now located on the east coast. Because of the larger population and existing industrial base, the regional economic benefits from OCS oil and gas development would be less significant than in New England. Potential oil and gas production from the Baltimore Canyon would provide about 10 percent of regional oil and natural gas requirements by 1985 (assuming medium demand and average production). This production would represent an important contribution to the region's energy needs but would not substantially offset the expanded need for supplemental energy supplies in the region. As in New England, economic activity induced by OCS development would not appear to cause unacceptable socioeconomic or environmental pressures pro- vided that development is directed to appropriate locations, is adequately planned well in advance, and is cohtrolled, Adverse impacts would be more significant in the southern part of the region, less so in already industrialized areas, but minor in the region as a whole. If production from the Baltimore Canyon is low, then the oil is likely to be transported by tanker and processed in existing or expanded refineries in the industrial belt between Wilmington and New York City. Although local environ- mental impacts may result from refinery expansion, the onshore impacts of low Baltimore Canyon production wc~ld .e little noticed either positively or nerativel,. However, if oil production is heh, it is likely that new refinery capacity would be required and much of the oil piped to new refineries which are likely to be sited in relatively rural areas in the southern part of the region, such as Cumberland and Cape May Counties in New Jersey. By 1985, up to 30,000 new jobs could be created, PAGENO="0192" 186 1-19 increasing local employment 30 percent. Local economic output could increase 56 percent, but only 3 to 4 percent in the region. The associated population growth could place great stress on public facilities such as schools, hospitals, and water supplies in the local area. Induced industrial development might cause significant pressures on available unused land. The southern part of the region could also experience major socio- economic impacts. Resort industries, agriculture, and light manufacturing are the primary sources of employment now. OCS development could significantly transform the economic structure of the southern part of the region to a petroleum industry base, thus substantially changing the lifestyle and environ- ment of the area. Southeast Georgia Embayment. The Southeast Georgia Embayment area with the greatest potential for OCS oil and gas accumulation is very near shore, and the probabilities are high that oil spills from this area would come ashore in a very short time. In the spring and swnmer months, should a spill occur fran EDS 10, 11. or 12, there is a 90 to 100 percent probability of its coming ashore, but the probability diminishes to 15 percent or lower during the fall. Spills at these sites appear more sensitive to distance from shore than at any other OCS location considered in this study. From EDS 11 a spill occurring in April could come ashore in as little as 6 days (spring average, 36 days). A spill occurring at EDS 12 during summer could come ashore in only 18 days ~summer average, 60 days). This site is the one farthest from shore. The South Atlantic experiences more severe storm conditions than those prevalent in either the Gulf of Alaska or the North Sea. PAGENO="0193" 187 1-20 Hurricanes are frequent and the highest waves in any of the 0CS areas are found here; a wave of 87 feet was recorded off Georgia, and 60 to 70 foot waves are common off Cape Hatteras. The South Atlantic coastline, particularly from Myrtle Beach nearly to Jacksonville, is unusually diverse and is largely undeveloped. Large estuaries alternate with beautiful sandy beaches and highly productive grass flats. Any OCS development affecting this exceptional section of coast must be carefully integrated with existing ecosystems. Onshore industrial sites should be directed inland -- away from the biologically fragile coastal wetlands. Resort and recreational uses of beaches are also of prime importance; a spill at EDS 12, for example, would probably come ashore at St. Augustine. Onshore effects of OCS development could be of greater magnitude in the Southeast Georgia Embayment region than in any other OCS area. However, the potential production of oil and gas from the Southeast Georgia Embayment could provide approximately 15 percent of the South Atlantic region's needs (assuming medium demand and average production). Economic and social changes will be particularly significant in this region but will differ in magnitude between the Charleston and Jacksonville areas. For the Charleston region, most industrial and commercial activity in support of the refining and petrochemical industry would be expected to locate in or near the city because it is the only major metropolitan area within the surrounding region. As such, under high impact conditions the population of the immediate Charleston area could as much as double by 1985 and 59,000 new jobs could be created. This expansion can be equated with development of a new city; up to 37,000 new dwellings (demanding over $1 billion in mortgage financing) along with schools, public services, and utilities. Cultural, natural, and historic resources could be threatened. The surrounding region could experience a similar employment growth rate -- up to 88,000 new jobs by 1985 and 110,000 by 2000. 50-194 0 - 75 - 13 PAGENO="0194" 188 1-21 The region comprising Jacksonville and its surroundings could accommodate high OCS impacts more readily than Charleston. Jacksonville is already undergoing extensive growth, and the existing infrastructure is better equipped to plan for and assimilate population increases. With OCS development, employment could increase by up to 37,000 by 1985 and 57.000 in 2000. Population could increase by up to 50 percent in 1985. Impacts on regional growth would be about the same as those for the local area. Air and water pollution could be a significant problem. BOO could double in both the Charleston and Jacksonville areas, and hydrocarbon emissions would rise as a result of refinery and petrochemical development. Care must be taken to avoid violating ambient air and water quality standards. Land requirements could easily be met in both areas, but the many swamps, salt marshes, and wetlands would require careful industrial, commercial, and residential siting. Gulf of Alaska. The Gulf of Alaska hypothetical drilling sites are dispersed along the coastline, but they can be separated into eastern and western areas at lSO'W longitude. Should a spill occur, it would have a lower probability of coming ashore in the western than in the eastern area (see Table l-l(. For instance, the maximum probability from the ADS 7 is 45 mercent in summer but less than 10 percent in all other seasons, and the probabilities of a spill coming ashore from ADS 8 to 9 are no greater than 10 percent in any season. The situation is considerably worse in the eastern Gulf area where the probabilities for a spill coming ashore from all sites (ADS 1 through 6( are no lower than 40 percent in winter and exceed 95 percent in the summer. In the eastern area, the minimum time to reach shore could be as little as 3 days from ADS but more representative is the 7 or 8 days from the other sites. The average times to shore are typically in the 20- to 30-day range, with seasonal variation. A critical factor is the retardation of oil weathering in northern regicms due to cold water. Further,due to the reduced sunlight in winter, weathering can be expected to be slowest in the Gulf of Alaska. PAGENO="0195" 189 1-22 Biological data are scant on the Gulf of Alaska, but fish spawning and bird nesting in coastal areas are known to be of vital ecological importance, particularly in the eastern Gulf area. If an oil spill should occur, there is a high probability of its coming ashore in the eastern Gulf in the summer months. This is the time of prime nesting for migratory birds and of the early larval life of newly spawned fish. Storms are more frequent in the Gulf of Alaska than anywhere else in the Northern Hemisphere. The storms generally move west to southwest and then southeast. Iding could be a problem in February. The impact of earthquakes and tsunamis is another matter -- major earthquakes of Richter 7 magnitude are common every 3 to 5 years, and severe Richter 8 earthquakes can be expected every 25 years. Tsunamis also are frequent and would not only create damage at fixed berth tanker sites, but in conjunction with earthquakes they can severely stress underwater storage facilities. The ocs production of oil and gas from the Gulf of Alaska would provide more supplemental supplies of oil and gas than are needed on the west coast and in Alaska itself. This would probably mean that present patterns of oil distribution would be changed, with more oil being shifted to the Midwest and east coast. Onshore impacts are considered for Alaska and the west coast together because no significant new refining or petrochemical development is expected in Alaska (see Table 1-3). There a significant proportion of the economic and social effects would be felt in Anchorage, the center of present Alaskan development and the likely base for much of the commerce servicing offshore operations. However, a number of coastal communities could feel the effects of OCS development in addition to the impacts of Trans-Alaska Pipeline construction and operation. These PAGENO="0196" TABLE 1-3 Summary of Onshore Impacts, West Coast: High Development' Key impacts Alaska Washington/Oregon Northern California 1985 2000 1985 2000 1985 2000 Local Region Local Region Local Region Local Region Local Region Local Region Primary impacts Number of offshore platforms (25,000barrelsperdayl 19 19 60 60 na. na. n.a. n.a. n.a. n.a. n.a. no. Number of refinery equivalents (200,000barrelsporday( 0 0 0 0 0.1 0.1 1.3 1.3 1.3 1.3 3.5 3.5 Namber of gas processing plants 1500 million cubic feet per dayl 1 2 5 16 0 0 0 0 0 0 0 0 Number of petrochemical complen equivalents (1 billion pounds H per year olefins) 0 0 0 0 0 0 3.0 3.0 0.5 0.5 2.9 2.9 Value of incremental construe- Ut tion (millions of 1970 dollars) 16 55 6 21 214 214 86 86 194 194 78 78 Aggregate impacts Employment (thousandsl 1.1 4.4 0.8 3.7 11.0 17.3 16.5 32.2 16.4 28.3 22.0 42.7 136) (2) (12) (1) 117) (21 1191 121 (6) (1) (51 Ill Population (thousands) 4.2 16.0 3.4 12.9 22.0 39.0 31.4 71.0 33.7 67.3 42.4 97.0 (43) (4) 1131 (21 (151 121 1171 (21 (3) Ill 13) 11) Acreage required (thovsandsl n.a. n.a. n.a. na. 8.1 10.8 13.2 18.5 5.2 7.3 7.8 10.9 (121 (21 (161 (31 (31 (1) 14) (2) Hydrocarbon loadings Itlrvusand tonsperyrarl 1.7 1.8 23.4 23.6 15.1 15.5 43.3 43.7 131 (21 (421 (18) 121) (11) 1481 (25) Biological ooygev demand (million tons per yearl 0.2 0.7 2.2 3.7 1.3 1.8 3.6 4.6 171 (1) (53) (4) (15) 121 (12) 13) All imports are over base cost conditions. The numbers in parentheses represent percentages over base case conditions, thn first over Base Case 2 and thn second over Bose Case 1; where there is only onn number, t)tn percentage increase is the same for either base case. Source: Resource Planning Associates, Inc., and David M. Dornbusch & Co., 1974, "Potential Onshore Effects of Oil and Gas Production on the Atlantic and Gulf of Alaska Outer Continental Shelf," prepared for the Council on Environmental Quality under contract No. EQ4ACOO2. PAGENO="0197" 191 sparsely populated towns and villages could expect to undergo boomtown conditions with multifold increases in employment and population as early as 1985. OCS-related employment increases in Alaska as a whole could grow 20 percent by 1985. The Puget dound and San Francisco Bay areas can be expected to be focal points of economic and social impacts related to refining Alaskan OCS oil on the west coast. Puget Sound now has refining capacity; under OCS development, employment in this region could increase up to 20 percent by 1985 and the population up to 15 percent. Land availability will be restricted by the mountainous terrain. Air and water oollution, however, is not expected to be critical. The San Francisco Bay area also has refininq caoacity, With OCS development, employment in the region could increase up to 6 percent and population to 3 percent. Land availability is restricted due to the vast amounts of wetlands and marsh along the say. Air pollutant emissions could increase up to 40 percent, and care must be taken to avoid violating an~bient standards. Water pollution is not expected to be a problem. The West Coast analyses assume that all Gulf of Alaska OCS crude oil going to the Puget Sound and San Francisco regions would require additional refining capacity beyond that constructed for North Slope or imported crude -- construction that is likely to take place earlier than Alaskan OCS development. Thus, to the extent that Gulf of Alaska crude is not needed to meet west coast demand and is shifted to other parts of the country, the impacts described above are over- estimated. OCS Technology Practices The technology and practices used in locating and exploiting OCS oil and gas resources continue to evolve. Past experience must be balanced with future expectations in judging the adequacy of OCS technology and the ability PAGENO="0198" 192 1-25 of industry to use it safely in new OCS areas. Following the Santa Barbara blowout, the U.S. Geological Survey modified OCS regulations in several significant ways. Further, industry appears to be responding in other areas not directly covered by changes in the OCS orders. In general, the Council believes that OCS oil and gas technology can operate safely under conditions similar to those in the Gulf of Mexico and the North Sea. However, storm conditions in the Atlantic and storm and seismic conditions in the Gulf of Alaska present more severe threats to personnel safety and environmental protection than the petroleum industry has faced before. Industry's ability to use technology safely is an essential element in minimizing environmental damage from oil and gas operations in new OCS areas. Careful attention to human factors, systems analysis, and personnel training are very important. Chapter 8 assesses OCS technology and practices in detail. The following recommendations for improvement are based on that assessment: The continuing search for better technology must build upon an improved understanding of the role of human factors in equipment design and must be coupled with thorough training of the equipment operators. The Council recommends that human factors engineering be employed to the fullest extent in the design of OCS oil and gas equipment. The Depart- ment of the Interior should review proposed designs for facilities to be used in new OCS areas and encourage the incorporation of man-machine engineering principles. Training programs may not be required for all types of jobs, but certainly for the most critical, curriculum stardardization and personnel certification should be required. The Council recommends that the Department of the Interior establish minimum Federal standards for critical OCS operator personnel and certify or provide for appropriate accreditation of thc training programs. PAGENO="0199" 193 1-26 Rapid, accurate measurement of downhole pressure appears important in improving the ability to maintain well control and to reduce the possibility of blowouts. The Council recommends that the Department of the Interior determine which technologies could improve the measurement of the formation pressure near the drill bit and incorporate them into the OCS orders. Serious consideration must be given to postponing leasing in an OCR region where oil cannot be safely produced and safely transported to markets because of significant threats of earthquakes, tsunamis, and severe storms. The Council recommends that the Departments of the Interior and Transportation coordinate their evaluation and approval procedures for drilling platforms for new OCS areas. They should prepare detailed performance requirements for such platforms, considering fully the natural hazards in these areas. The Council recommends that the Department of the Interior, in coordination with the Environmental Protection Agency, develop more detailed guidelines for the disposal of drilling muds, drill cuttings, and other materials, considering fully the results of the Bureau of Land Management monitoring studies of ocean disposal of these materials in new OCR areas. The Council recommends that the Department of the Interior develop and incorporate in OCS orders detailed performance requirements for production platforms and associated equipment to be used in new OCS areas, with full consideration of natural hazards. The Department should develop in-house capability, or should ccntract with a qualified independent firm, to evaluate the adequacy of the proposed designs to guarantee structural integrity subject to natural and manmade forces. The Council recommends that subsea production equipment be used in new OCR areas where it would provide a higher degree of environmental protection and reduce conflict between oil and gas operations and competing uses of the ocean. PAGENO="0200" 194 1-27 The Council recommends that the Department of the Interior develop detailed performance requirements for surface-actuated subsurface safety valves and require their use on all production wells in new ocs areas where technically feasible. The Department should encourage the development of such valves with higher pressure ratings and with improved reliability of operation over the life of the devices. In undeveloped areas like the Atlantic and Gulf of Alaska OCS, environmental loadings of oil and other materials should be kept at the lowest levels possible at least until environmental baseline studies such as those recently initiated by the Bureau of Land Management determine the environmental risk from such materials. The Council recommends that the Department of the Interior and the Environmental Protection Agency, in cooperation, establish effluent standards for waste water discharge from OCS drilling, production, and associated operations. Strong consideration should be given to requiring installation of the best commercially available control technology for oil-water separation in new OCS areas. The Council recommends that the Department of the Interior develop detailed performance requirements for safety practices for well workover and servicing operations on production platforms and incorporate them in OCS orders for the new areas. The Department should consider regulations encouraging the use of improved technology to minimize the threat of blowouts during workover and service operations. The Council recommends that the Departments of the Interior and Trans- portation and the Environmental Protection Agency develop and implement a common reporting system for all accidents associated with OCS operations. This improved system should provide complete unambiguous reporting, with special attention to the analysis of cause-effect relationships. PAGENO="0201" 195 1-28 The Council recommends that the Departments of the Interior and Trans- portation develop detailed performance requirements for OCS pipeline protection and undertake the development of pipeline integrity monitors to detect incipient failures in OCS pipelines. The Council recommends that the Department of the Interior, in cooperation with other Federal agencies and the affected states, undertake advanced planning for pipeline corridor siting as soon as the location of potentially producing OCS areas is kncwn and designate corridors which avoid or minimize, to the maximum extent possible, intrusion into environmentally sensitive areas in the marine and coastal regions of new OCS areas. The Council recommends that the Coast Guard require that new tankers in the U.S. coastal trade (which would include tankers used to carry OCS oil to shore( be constructed with segregated ballast capacity preferably with double bottoms where ship safety would not be jeopardized. Existing tankers used to carry OCS oil to shore should be prohibited from discharging oily ballast water to the oceans. In addition, the Coast Guard should seriously consider requiring new and existing ships to employ advanced accident prevention technologies to improve vessel maneuverability and communications. Decisions on offshore oil storage in the Atlantic and Gulf of Alaska OCS must fully consider the potential impacts of severe storm and seismic conditions. The Council recommends that the Deoartmonts of the Interior and Transportation develop detailed performance standards for offshore storage facilities and incorporate them into OCS orders for the new areas. The Council recommends that the Federal Government and industry continue efforts to improve oil spill containment and cleanup. The Council recommends further that the Departments of the Interior and Commerce and the Environmental Protection Agency cooperatively consider the identification of critical environmental regions in new OCS areas and the incorporation of appropriate measures into the National Oil and Hazardous Substances Pollution Contingency Plan. PAGENO="0202" 196 1-29 Planning, Coordination, and Regulation Effective planning for and regulation of OCS activities involve a number of elements: a rational allocation' of regulatory rights and responsibilities and an efficient means of coordination among rntities sharing the authority; provision for ensuring that necessary information is obtained and analyzed prior to regulatory actions and that the public has enough information to allow informed participation in the process; ongoing systematic evaluation of OCS technologies and practices and incorporation into OCS regulations specific require- ments necessary for environmentally sound operations; enforcement of the requirements through effective inspections and sanctions for noncompliance; and means for compensation of injured parties when mishaps occur. These elements are discussed in detail in Chapter 9 and are the basis for the following recommendations: The Council recommends that states affected by new OCS development strengthen their coastal zone management programs by developing special technical expertise on all phases of OCS development and its onshore and offshore impacts. Such augmented state coastal zone management agencies should attempt to ensure that state interests and regulatory authorities are fully coordinated with Federal OCS technical and management activities. Federal agencies should make every effort to cooperate with state coastal zone management agencies on an ongoing basis and at all stages of the management process. The NEPA process can be an important focus of Federal-state coordination concerning OCS development. The Council recommends that state coastal zone management agencies be given the opportunity to cooperate with Federal agencies in designing and preparing environmental studies used as input to the environmental review process, in addition to commenting on draft environmental impact statement. PAGENO="0203" 197 1-30 The Coastal Zone Management Act provides a framework for Federal-state cooperation in planning for onshore development induced by OCS operations, particularly siting of pipelines, refineries, and other facilities in the coastal zone. The Council recommends that the Secretary of Commerce require that state coastal zone plans consider refineries, transfer and conversion facilities, pipelines, and related development as a condition of approval. State coastal zone management agencies and concerned Federal agencies should jointly participate in developing these portions of the plans. Many Federal agencies, each with specific missions, have regulatory and operating authority affecting the OCR. There is no formal mechanism for coordinating the exercise of their responsibilities. The Council recommends that the proposed Department of Energy and Natural Resources be established. This centralization of authority would increase the effectiveness of Federal efforts in achieving closely related regulatory objectives in the OCR. The Council recommends that impact statements on environmentally significant OCR activities include in the discussion of `the range of potential uses of the environment" analyses of possible alternative uses of specific OCR, nearshore, and onshore areas. In addition, the statements should include discussion~ of onshore impacts. In commenting on draft statements, Federal agencies, states, and interested parties should give particular emphasis to those issues. OCR decisionmaking could also be enhanced through regional. programmatic impact statements. The Council recommends that programmatic statements should be prepared on a regional basis by all Federal agencies proposing environmentally significant activities on the OCR. Comprehensive OCR planning could be approached through reconciling various agency state- ments in the circulation and comment process. PAGENO="0204" 198 1-31 The Council recommends that the Department of the Interior, in consultation with other appropriate Federal agencies, determine the kinds of information and analyses necessary for adequate assessment of environmental factors at all stages of leasing and development. The Department should take measures to obtain such information, including acquisition and analysis of high-resolution, near-surface seismic reflection data for the purpose of determining the nature and magnitude of geologic hazards prior to tract selection. The Council recommends that the Department of the Interior consider the competitive consequences of requiring disclosure of certain industry data and analyses. The Department should weigh those consequences against the benefits to be obtained and develop standards for governing such disclosures. In making that balance, it should consider particularly the need for informed public participation in the NEPA process. The Council recommends that, in order to deter violations of OCS orders rather than simply shortening the time that operators take to correct noncompliance, the Secretary of the Interior propose sanctions requiring fixed shutin periods and administrative fines as enforcement measures. The Council recommends that the Department of Interior determine the frequency and type of inspections necessary to verify compliance during all phases of DCS operations. It should establish inspection teams and procedures in light of those determinations and the scale of OCS develop- ment in various regions. State agencies should be invited to participate in these inspection efforts. In addition, the Department should establish a formal training program for the inspection staff. PAGENO="0205" 199 1-32 Citizen suit provisions, which allow interested persons to sue to remedy violations of Federal regulations or permit conditions, can provide a useful compliance mechanism. The Council recommends that the Secretary of the Interior seek the establishment of such a right under the OCS Lands Act. The Federal Government should carefully consider the full economic and environmental implications of various types of liability -- fault or nofault -- and various means of ensuring adequate com- pensation such as liability insurance for operators or a revolving fund financed through charges on operators. The Council recommends that a comprehensive Federal liability system for OCS-related oil spill cleanup and damages be established through new legislation. Research Needs In the course of this study, the Council found many gaps in biological, physical, chemical, technological, economic, and social data. These gaps must be closed and the research results must be usefully incorporated in improving OCS management decisions. We have mentioned earlier in this chapter the need for well-designed biological baseline and monitoring studies. Questions of when, where, how, and what to measure slso must be answered. Other biological research needs are outlined below and in Chapter 6: Population life histories for many species ,including identification of survivorship, fecundity, larval lifestyle, migrations, and behavior. Community response at the species level following polluting incidents or in controlled experiments. Adaptations of organisms to oil exposure, including genetic changes. Impacts of oil during sensitive stages of species development. Effects of oil on commercial fisheries. PAGENO="0206" 200 1-33 OCS technology should continue to evolve in order to ~nsure lower levels of risks from operations in the Atlantic and Gulf of Alaska. Research can contribute to understanding the behavior of offshore structures under storm and seismic forces, to reducing chronic pollution from OCS operations. to improving the integrity of offshore pipelines, and to integrating knowledge of human factors engineering into design. Improved Federal performance standards for OCS operations should draw upon the results of such research. The council believes that further study of onshore ~mpacts of OCS activities is needed. Studies focusing on the socioeconomic impacts of OCS development at specific sites will be needed by local decisionmakers. Availability of land for development, impacts on the quality of life, shifts in population and employment patterns -- all must be evaluated on a local basis to be of use in state and local planning. References 1. The President's Energy Message of April 18, 1973. 2. 67 Stat. 462, 43 U.S.C. §1313. 3. 83 Stat. 852, 42 U.S.C. §4321. 4. 86 Stat. 1280, 16 U.S.C. §1451. 5. 86 Stat. 816, 33 U.S.C. §1251. 6. 86 Stat. 1052, 16 U.S.C. §1431. PAGENO="0207" 201 Senator GRAVEL. These hearings will be in recess. Our review of agency budget requests will continue tomorrow at 10 a.m. in this room when we will hear from representatives of the Federal Disaster Ad- ministration, the Economic Development Administration, the Ap- palachian Regional Commission, and the Title IV Regional Commis- sion. The hearings are in recess. Thank you very much, Mr. Adminis- trator. Thank you, gentlemen. [Whereupon, at 12:35 p.m., the committee recessed, to reconvene at 10 a.m., Tuesday, March 4, 1975.] [The statement of Dr. Dade W. Moeller previously referred to by Senator Muskie, and a letter from the Association of Local Air Pollu- tion Control Officials, follow:] PAGENO="0208" 202 HARVARD UNIVERSITY SCHOOL OF PUBLIC HEALTH KRESGE CENTER FOR ENVIRONMENTAL HEALTH 665 Huntington (Avenue DEPAZThENT op Ero Thi. HEALTH SCIENCES ķBoson, Jvfarsachuse:ts 02115 Tel. 617 734-3300 -410 January 30, 1975 Mr. Karl Braithwaite Committee on Public Works U. S. Senate 4202 Dirksen Office Building Washington, D. C. 20510 Dear Mr. Braithwaite: As a follow-up to our meeting on Novenber 11, 19714, and my telephone conversation with your Office on January 10, 1975, I an enclosing written testimony on "Air Pollution Manpower `Developnent" for use in connection with the February Hearings of your Subcommittee on Environmental Pollution. If time permits, I would appreciate an opportunity to appear at the Hearings to make an oral statement along the lines of the enclosed written material. Thank you in advance for your consideration and support. Sincerely yours, ~ Dade W. Moeller, Ph.D. Associate Director Kresge Center For Environmental Health DWM: mb End. cc: Mr. F. J. King Mr. J. J. Schueneman Mr. H. Strelow Mr. R. E. Townsend PAGENO="0209" 203 REPORT ON AIR POLLUTION MANPOWER DEVELOPMENT Testimony Prepared by Dade W. Moeller, Ph.D. Associate Director, Kresge Center for Environmental Health School of Public Health Harvard University 665 Huntington Avenue Boston, Massachusetts 02115 for Presentation to the Subcommittee on Environmental Pollution U. S. Senate Washington, D. C. January, 1975 50-194 0 - 7.5 - 14 PAGENO="0210" 204 REPORT ON AIR POLLUTION ?~ANPOWER DEVELOPMENT I. Introduction Mr. Chairman and Members of the Subcommittee on Environmental Pollution, my name is Dade W. Moeller, and I am Associate Director of the Kresge Center for Environmental Health, School of Public Health, Harvard University. For the past 15 - 20 years I have been closely associated with the development of manpower for the environmental health profession. This association includes serv- ing as Director of the Public Health Service's Radiological Health short course training program at the Robert A. Taft Sanitary Engi- neering Center from 1957 - 1961, serving as a consultant to the Professional Examination Service of the American Public Health Association from 1959 - 1963, serving as chairman of the American Board of Health Physics from 1967 - 1970, and serving as a member of the Committee on Licensing Examinations for Engineers of the American Academy of Environmental Engineers from 1969 - 1973. During the latter part of l97~I, I served as a consultant to the General AdvisOry Committee of the U. S. Atomic Energy Commission on matters pertaining to health physics manpower development. Since 1972, it has been my privilege to serve as Chairman of the National Air Pollution Manpower Development Advisory Committee (NAPMDAC), a group established under Section 117(d) of the 1970 Clean Air Act, PL 91_6014. The basic charge to NAPMDAC is to provide the Environmental Protection Agency (EPA) with an independent evaluation of its efforts to meet air pollution manpower needs. The Committee also serves as a mechanism for participation by citizen leaders in EPA's environmental program. The Committee consists of twelve members, including the Chairman, who are appointed by the EPA Administrator on the basis of significant achievement in their profession. Members are selected from the scientific, engineering, olanning, socio-economic, and legal disciplines; resident in PAGENO="0211" 205 institutions of higher education; State and local government, and research institutions. A membership list for the Committee is shown in Table I. My purpose today is to acquaint you with recent activities of the Committee and to transmit some of our findings, observations, and recommendations. However, to put my comments in proper per- spective it is appropriate first to review the basic manpower training and educational assistance programs of EPA and their accomplishments to date. Overall, EPA has assisted over 25 colleges and universities in developing and maintaining graduate programs in air pollution control. During the past five years (F.Y. 1970 through F.Y. 19714), funds made available through Training Grants administered by EPA have provided financial assistance to over 1000 students pui~suing Master of Science degrees within these programs. Direct Fellow- ships have been provided to 190 additional students for Master of Science degree education in interdisciplinary programs incorpora- ting air pollution control, environmental law, economics, and land use planning. A large percentage of the graduates of these programs are now full time employees of Federal, State, and local air pollution control agencies. Through the Air Pollution Train- ing Institute at the Research Triangle Park in North Carolina, short course training has been provided during this same five year period to over 114,000 employees of Federal, State and local agencies, colleges and universities, and industrial orgar~r~ations. As part of its basic review responsibilities, members of NAPI~DAC have site visited on an annual or biennial basis all col- lege and university programs receiving financial assistaflce, the Committee has prepared a written critique of each such program, and has provided a summary of its comments and recommendations to appropriate EPA officials. At the same time, NAPMDAC members have prepared evaluations of each of the candidates applying for EPA Fellowships and have interviewed on an individual basis PAGENO="0212" 206 essentially all of the students receiving financial assistance. through graduate EPA Traineeships. Lastly, members of the Corn- rnittee have sat as observers in short courses presented by the Air Pollution Training Institute and have provided written cr1- tiques of these courses to the EPA staff. PAGENO="0213" 207 II. The Current Status of Air Pollution Manpower Development While still performing its basic review procedures, NAPMDAC has- during the last few years devoted an increasing portion of its efforts to intermediate and long range planning for proposed Federal actions on training and educational programs in this air pollution control. During 197'4, the Committee conducted three lndepth studies to define essential components of a total manpower development program and to evaluate current efforts on specific segments of such a program. Details of these studies and related information are summarized below. A. Total Manpower Development The primary objective of the first of the NAPMDAC s1~udies was to define the essential components of a total manpower develop- ment program. As a result of this effort, the Committee identi- fied five major areas in which a total Federal air pollution man- power development effort should be involved. These are: 1. Short-term technical training programs designed to assist in upgrading the qualifications of present employees of Federal, State and local control agencies. 2. Graduate educational opportunities to increase the number of personnel qualified and available for employ- ment in control agencies; 3. Assistance to States in manpower development; 14~ Programs to increase public awareness in air pollution personnel employed by Federal Agencies. A more detailed outline of these subjects is presented in Table II. In support of the above recommendations, the Committee urged continuation of a strong short-term technical training program within the Environmental Protection Agency and improved finam~ial assistance to graduate educational programs in air pollution con- trol. The Committee further recommended that increased attention be directed to programs designed to acquaint high school science teaehers with air pollution problems to assure that young people PAGENO="0214" 208 are provided with accurate up-to--date information on the status of such problems. By generating interest in reducing air pol- lution, such programs would build a cadre of students who would be desirous of pursuing studies in air pollution control. Similar efforts are also needed at the undergraduate college level. Many colleges today have courses relating to the environ- ment and most include some coverage of air pollution problems. In many cases, however, Faculty members responsible for these courses have had little or no formal education in air pollution and the quality of their courses suffers accordingly. One approach which has been tried on a limited basis and which has proven very effective in providing undergraduate college teachers with the information they need is to offer them the opportunity of ~arti- cipating in Summer Institutes specifically designed to provide them with indepth knowledge in this subject area. Such Institutes could be readily planned, staffed, and presented by air pollution Faculty members at graduate universities receiving financial assistance through EPA Training Grants. From the standpoint of improving career development among EPA personnel, the Committee recommended that greater use be made of employee interchange among various Federal air pollution re- lated agencies. A secondary objective of this study was to delineate those areas within a total manpower air pollution development program which were most in need of immediate attention. Summarized be- low are some of the more prominent problem areas cited. 1. Short Course Training It was the conclusion of the Committee that many essen- tial topics are not covered by the short-term technical courses currently available to personnel in State and local air pollution control agencies. These include: (a) Training agency administrators in areas of manage- ment, panpower planning, and development of enabling legislation; PAGENO="0215" 209 (b) Training agency staff members in assessment and quality assurance programs, public involvement in planning processes, and career development of support personnel; (c) Development of interagency relationships to produce greater effectiveness of air pollution control through im- proved socio-economic, land use, and transportation planning. These findings are delineated in Table III. To its dismay the Committee has recently learned that EPA is considering the elimination of the direct short-course program of the Air Pollution Training Institute, in favor of contracting this activity to private consulting firms and/or university orgariiza- tions. In the opinion of the Committee, this will result i~i a diminution in the quality of these courses and probable duplica- tion through having a multitude of groups perform a function which is now effectively administered by a centralized training organization within EPA. The Committee sees this proposal as the ultimate step in a series of actions taken in recent years, all of which have led to a deterioration in the effectiveness of the EPA short-course pro- gram. For example, in F.Y. 1972, 3,216 people attended short courses presented by the Air Pollution Training Institute. Be- cause of the imposition of user fees and reductions in program staffing, attendance in F.Y. l97~ decreased to 2,793. The change in man-weeks of training offered was even more dramatic, declining from 3,610 in F.Y. 1972 to 2,162 in F.Y. l97~. Further details on the short course pro~ram are given in Table IV. As a result of this situation, it is estimated that the EPA short-course training program is currently meeting only 30% to 35% of the direct training needs of State and local agencies. Other indicators of the need for increased emphasis on training and manpower development are estimates that only 145% of the 14,000 point sources of air pollution in this country, presently in vio- lation, will be brought into compliance by mid-1975 and that error PAGENO="0216" 210 rates of 30% to 35% in reporting emission data will continue until more and better qualified staff become available. Manage- ment capability in agencies is also expected to deteriorate as control operations become more complex and opportunities for employee training become more limited. Considering the severe limitations imposed by the lack of personnel, one must be im- pressed with the advances made in air pollution control through- out the country. At the same time, however, it is clear that much remains to be done. The public cost of air pollution de- mands that control processes be accelerated. The latest EPA figures show that the damage from air pollution for the year 1970 ranged from $6.1 to $18.2 billion, with the best estimdte being $12.3 billion. 2. Manpower Development at the State Agency Level As has been pointed out above, the Committee noted that Federal programs related to manpower development do not cover a sufficiently wide range of subjects. To improve programs at the State. level, the Committee recommended the provision of direct financial assistance to States for manpower development planning, the preparation of manuals on manpower planning pro- cedures, and the provision of increased opportunities for State employees to improve their skills through direct training short courses. The overall conclusion of the Committee was that some of the areas cited above are not being given any consideration and that attention to others was woefully inadequate. The committee's report called for increased efforts on the part of EPA toward all aspects of manpower development and recommended that such matters be evaluated on a periodic basis. B. Survey of State Highway Departments and Planning Agencies In 19714 the Committee also undertook a survey of highway departments,'planning agencies and their employees to determine the extent to which they were involved in air pollution control. An objectiveof this study was to assess whether greater air p01- PAGENO="0217" 211 lution training efforts within such agencies would make a sig- nificant contribution to reductions in environmental problems. The response to the survey was excellent; 147 of the 50 State highway departments and 87 planning agencies representing 36 states returned completed questionnaires. 1. Extent of Air Pollution Activities The survey showed that most State highway departments ~4ere engaged in some form of air quality studies. In contrast to this, few State planning agencies were directly engaged in the development of land use plans and even fewer in air quality studies. For example, of the responding highway departments, 39 indicated that they prepare in-house air quality reports for environmental impact statements. Twenty-four planning agencies revealed that they do similar in-house studies. Seventeen such agencies, however, availed themselves of the services of other agencies to conduct such studies. Eleven highway departments, not now having in-house capabilities for such studies, indicated that they would develop such capabilities in the future. Thirty-eight planning agencies indicated the same objective. Thirty-one highway departments in- dicated that they employ staff members specifically assigned to conduct air quality studies and the total number of people engaged in such activities was 217. Seventeen planning agencies reported that they have staff members qualified to conduct air studies. The total number of people employed by the 17 agencies to conduct air quality studies was 214. Both the highway departments and the planning agencies in- dicated that between 19714 and 19814 they anticipated a substantial increase in the number of people they will employ to conduct studies related to air pollution control. At the end of F.Y. 19714, the hi~hway departments responding to the questionnaire indicated they would have 217 air pollution specialists on their staffs, and they anticipated increasing this to 362 within the next ten years. Plan- ning agencies, on the other hand, projected a total of 1141 person- nel by the end of F.Y. 19714 and 229 by F.Y. 19814. In the opinion of the Committee, however, most planning agencies PAGENO="0218" 212 are not aware of the part they can play in reducing air pollution through land use and transportation planning. Therefore, it is the consensus of the Committee that these agencies have greatly underestimated their need for staff members qualified in air pollution control. 2. Education and Training of Personnel A review of the backgrounds of individuals employed specifically for air related studies in State highway departments and planning agencies showed that fewer than lO~ had taken fornal course work in air pollution studies as a part of their university education. A majority appeared to have gained their knowledge in this field through short courses presented by the Federal Highway Administration. A few had participated-ii~ EPA~atiopal and regional short course programs and in similar activities offered through State agencies. Reflecting this situation, agencies and individuals indicated considerable interest in course work and specialized training in air pollution control. Of the 216 in- dividual respondents, 814 indicated that they would like to take courses through EPA national or regional offices, 142 expressed an interest in taking night courses through local institutions of higher education, and 107 expressed a desire for in-service train- ing programs. The majority of agencies expressed an interest in courses at all levels, but indicated a preference for in-service training or night school. On the basis of the results of this survey, the Committee con- cluded that there was a definite need for expanded direct short- course training programs to meet the air pollution needs of person- nel working with State highway departments and planning agencies. It was the conclusion of the committee that an increased invest- rent in training people for work in such agencies has the potential for returning substantial benefits in reduction of air pollution. C. Survey of Training Grant Universities To assure that all segments of manpowe~r planning had been. PAGENO="0219" 213 reviewed, NAPMDAC also studied the impact of changes in Federal policies on research and educational programs now or previously provided assistance through EPA air pollution grants. The primary goals of this study were to obtain information on trends in the number of students enrolled, the impact of recent EPA policies on university faculty members, and the effects of related EPA actions on on-going air pollution research. Twenty-one colleges and uni- versities responded to the questionnaire. This represented approxi- mately two-thirds of the schoolspolled. Highlights of the survey are summarized below. 1. Trends in University Support and Student Enrollments Since F.Y. 1971, EPA has been effecting a gradual reduction in Training Grant support for graduate programs in air pollution control at the universities. Funds allocated within this program have dropped from a high of $3,375,000 in 1971 to $1,200,000 in 1975. Details of annual investments during the past seven years are summarized in Table V. The reductions In funds resulted in the termination of six graduate air pollution educational programs on June 30, 197k; and seven additional programs are slated to be terminated on June 30, 1975. If current plans proceed to comple- tion, Federal support for the remaining twelve university programs will be phased out on June 30, 1976. A listing of the specific universities affected by these actions is given In Table VI. The consequences of these actions are significant. The Federal government, while recognizing the severe impact of primary and secondary problems of air pollution, is at the point of abdica- ting its responsibility for training and educating people to deal with this serious threat to the public health and well being. There are 180 full-time graduate air pollution students enrolled in the 18 programs currently receiving Federal financial support through EPA Training Grants. A recent supplemental survey of the ur.Iversities conducting these programs indicates an anticipated enrollment of approximately 120 students in F.Y. 1976. In F.Y. 1977, however, the total enrollment is expected to drop to about PAGENO="0220" 214 1OQ students and it is estimated that by F.Y. 1978 enrollment will have declined to about 70 students. If this situation is allowed to occur, there would then be only 70 new graduates qualified to meet the needs of the 50 state agencies, local agencies, and numerous industries and federal agencies at the beginning of F.Y. 1978. Concurrent with the reductions in Training Grant support, there is a planned decrease in the number of Fellowships being provided for graduate study. Whereas Training Grants are intended to add to the manpower pool available for air pollution control agencies, Fellowships are directed primarily to current agency employees who need to return to college for additional full-time study. If the phase~out of the Fellowship program proceeds as planned, graduates assisted by this program willdecrease from 70 full-time students in F.Y. 1975 and F.Y. 1976 to no more than ten students in F.Y. 1977. Thus, the enrollment of air pollution Master of Science degree candidates is expected to drop from about 250 students in F.Y. 1976 to no more than about 80 students in F.Y. 1978, an overall reduction of almost 70%. A summary of this information is presented in Table VII. Another example of the impact of the reduced numbers of traineeships is the situation with respect to doctoral candidates in air pollution studies. During the 1970-7]. academic year, there were 68 doctoral candidates receiving aid. Today there are no students receiving EPA air pollution traineeships or fellowships at the doctoral level. One direct result is that about half of the universities surveyed in this study reported that there is a shortage of properly qualified applicants to fill faculty vacancies in air pollution control programs. A secondary effect is the serious erosion of sorely needed research in air pollution control. That such reductions in student enrollment would accompany PAGENO="0221" 215 the phase-out of traineeships and fellowships is in line with studies which have been made on other facets of the public health field. For example, a 1973 survey of ~40 Master of Public Health degree candidates at the Harvard School of Public Health showed that 90% would probably not have enrolled in the program had fellowship and/or traiņeeship aid not been available. The same question posed to students in air pollution control by members of NAPMDAC during site visits over the past three years produced similar replies. There is no indication that EPA Research Grant or Contract Funds are providing any significant support for graduate air pol- lution students. Only six doctoral candidates in air pollution control were being financially assisted by an EPA Research Grant or Contract Funds during the academic year, l973-7~I. Directors of the Graduate Programs responding to the NAPMDAC survey stated tha~,in their opinion, it was completely unrealistic to contend that a sufficient number of students can be supported by research funds to meet the nation's need for qualified air pol- lutiori control personnel. One reason cited was that most such funds are in the form of contracts which are issued for narrowly defined studies of short duration. Such research does not allow the flexibility of covering the wide spectrum of subjects required for qualification in control procedures. Indeed, time limitations imposed on the research make it virtually impossible to use stu- dents on the studies. Consequently, graduate air pollution faculty find they are hard pressed to produce the reports and results required under the research contracts, and cannot accept the additional burden of training and supervising students working on such projects. This situation is not compatible with the competi- tive nature of research contract activities today. 2. Effect of Fund Reductions on the Quality of Educational Programs Five universities responding to the questionnaire were among those for whom Training Grant support has been or is about PAGENO="0222" 216 to he terminated. Four of the five universities stated thay they would continue to offer some form of graduate programs in air pol- lution control. However, three of these stated that there would be major reductions in the number of laboratory investigations SiTd practical field experiences. In fact, financial cutbacks which have already taken place have forced several universities to dis- continue laboratory exercises in all of their graduate air pollu- tion courses. One of the universities being surveyed stated quite frankly that, without the financial support formerly provided by the Training Grants, the continuing program would be "poor." The net result will be that agencies employing graduates from these programs will have to spend increasing amounts of time and money in short-course and on-the-job training to overcome these deficiencies. In essence, this situation is going to cause.in- creased delays and greater financial burdens to qualify graduates from these programs for productive work in the field. The continuing program at the fourth university studied is an interdisciplinary cooperative venture which involved only four students and was not representative of the more common, profession- ally oriented, graduate programs in air pollution control. 3. Effects of Policy Changes on On-going Environmental Re- search The survey showed that at the responding universities there has been no significant change in the number of research Contract and Grant proposals submitted by faculty members during the past five years, and indications are that they plan to con- tinue applying for such support during the coming year. It is significant to note, however, that the percentage of applications being approved has shown a steady decline from about 77% during the 1969-70 academic year to about 514% during the 1973-714 aca- demic year. Of 16 universities responding to a question concerning sources of their research support, seven reported that they cur- rently receive no. EPA Environmental Health Research Contract of Grant funds. Over half reported that due to the shortage of finan- PAGENO="0223" 217 cial support they had unused laboratory and/or environmental re- search space. Slightly over 140% reported that they had environ- mental research space which is now being used for other purposes. That such conditions exist is supported by the survey which shows that the total amount of funds available for air pollution research at the universities was lower during the 1973-714 academic year than It had been for any of the past five years, and that financial assistance provided by EPA was the lowest for any of the past four years. Contrat'y to the popular assumption that when federal funding is reduced the load Is taken up by the uni- versity or by the private sector, only three universities reported that their research budgets had been supplemented via University or State appropriations. Twelve reported that they had not. 14, Impact of Changes on Air Pollution Faculty Because of overall funding reductions, efforts on the part of faculty members to promote interdisciplinary programs In air pollution control for the most part are being discontinued. These programs included inter-departmental courses relating to law, public policy, economics, and land use planning. Also being lost are opportunities for updating courses during summer months and for faculty InteractIons with State and local agency control officials. In essence, the momentum and enthusiasm which charac- terized most graduate programs In air pollution control are rapidly being lost. Fifty-eight percent of the universities reported that they had lost budgeted positions due to a lack of environmental research funds. The number of positions lost ranged from one to eight with the average being between one and two. About 37% of the responding universities indicated they had experienced an accelerated turnover of Faculty due to lack of confirmation of environmental research and Training Grant funds on a long range basis. Several of the schools reoorted as much as a 50% increase in Faculty turn- PAGENO="0224" 218 over rate. As mentioned previously, the hiring of replacements for Faculty members who have departed has been made increasingly difficult by the reduced number of doctoral graduates. PAGENO="0225" 219 III. Justification for Federal Support of Air Pollution Manpower Development Goals for the protection of the nation's health and economic well being have been promulgated by the United States Congress through air quality legislation. These goals can be met only if a high level of competence in air pollution control is maintained. This includes providing air pollution control personnel in suffi- cient numbers and with adequate qualifications to properly staff control programs at all levels. It is a sad but true fact that being public servants, people working in this field are paid salaries lower than those paid for comparable work in private in- dustry. Experience has shown that, without incentives, the neces- sary manpower requirements for public control agencies willS not be net. Federal support of graduate education In air pollution control Is one such incentive. Part of the work of the EPA Air Program staff has been the updating and projection of statistics on manpower needs In State and local air pollution control agencies. A predictive model Is now being developed. Based upon present staffing patterns and budgeted vacancies necessary to conduct proper air pollution con- trol programs, this model estimates that a need exists today for several thousand additional professional and technical personnel at the State and local level. With improved educational and training programs which will enable some staff members to engage in a wider range of control activities, this number can be re- duced perhaps by one third. To ascertain the validity of these estimates, members of NAPMDAC conducted a telephone survey in January, 1975, of budgeted vacancies within air pollution agencies in 114 states and the District of Columbia. This survey revealed the existence of almost 200 vacancies at the professional and technical level. (see Table VIII). A supplementary survey of New York and the six New England States revealed over 150 additional budgeted 50-194 0 - 75 - 15 PAGENO="0226" 220 vacancies. Extrapolated to the Nation as a whole, these data in- dicate that there are probably 500 to 1000 budgeted, unfilled, professional and technical positions in State and local air pol- lution agencies at the present time. In fact, most such agencies are experiencing extreme difficulty in finding well qualified employees, and indications are that some vacancies have gone un- filled for as long as 2~4 months. As would be expected, this shortage is not confined to the States. Officials within EPA have in recent months also been unable to fill key vacancies on their staffs. Although the inbalance between supply and demand is one justification for Federal support of air pollution manpower development, there are many additional reasons for calling upon the Congress and Federal agencies to provide funds in this area. A list of such reasons has been developed by the members of NAPMDAC in recent months. The~se are summarized below. A. The Clean Air Act specifies that if the States cannot meet their Federally legislated responsibilities, the Environ- mental Protection Agency must assure that the programs are effectively carried out. The intent of this portion of the legislation was to cover those States lacking the financial resources and the incentives to develop ade- quate porgrams. Today, however, because of the shortage of qualified air pollution personnel, even the better State programs are under-staffed. It is far more economical, effective, and ~ministratively acceptable, to provide adequate personnel to the States to enable them to carry out their responsibilities, than to try to conduct these programs through EPA. B. Air pollution control is a form of preventive public health. In the long run, the public will pay the costs of attaining clean air, either as a part of the tax bill or in the form of increased costs of goods and services. Monetarily, it is far cheaner to prevent illnesses from air pollution than to provide health care services to those who are caused to suffer because of inadequate control. C. Mar~iy studies have shown that the impadt of environmental degradation is greatest on oeoole from minority and low- income groups. Career opportunities in air pollution PAGENO="0227" 221 control fill the needs of such people to work in a field relevant to problems with which they are familiar. Recent experience has shown that increasing numbers of young people form minority and low-income groups are entering the air pollution profession. Since few of them have the necessary financial resources to become qualified in this field, their only hope is through assistance from Federal traineeships and fellowships. D. As our understanding of the complex interrelationships between pollutants such as sulfates and photochemical oxidants has increased, the magnitude and depth of re-- search required to set meaningful air quality standards has increased dramatically. Even a modest effort in this area will require far greater numbers of highly trained scientists, engineers, and planners than are now avail- able. Federal support of graduate education is needed to provide qualified people to do these tasks. E. Sound graduate education in air pollution control requires that students have extensive laboratory and field exper- iences using highly sophisticated types of equipment which are necessary for adequate assessment of the associated health hazards. As a result, educational programs in this field are expensive and their success is heavily dependent upon Federal subsidies for laboratory equipment, consumable supplies, and field training. Fund- ing reductions to date have already caused many univer- sities to terminate the laboratory and field training portions of their air pollution programs. F. Modern education in air pollution control involves the blending of talents and courses in many disciplines. Such disciplines include engineering, chemistry, meteol- ogy, public health, toxicology, law, economics, land use planning, public policy, management, etc. Faculties having responsibilities for directing programs in air pollution control must have the time to establish and maintain contacts with such groups in order to provide the closely integrated type of multidisciplinary edu- cational experience that young people planning to enter this field need. Federal support of Training Grants in air pollution control is essential to the attainment of this objective. G. In past years, funds obtained through long-term research grants and contracts provided base level support to many graduate air pollution educational programs. This sup- port promoted work which led to the preparation of tech- PAGENO="0228" 222 nical papers and theses, and the publication by Faculty members of the basic textbooks used in the field. Today, research grants are almost unavailable and, where con- tracts exist, they are issued for short time periods, and must be directed to obtaining an immediate solution to a specific problem. As a result, the funding level of research contracts and grants held by Faculty members responsible for graduate air pollution education is lower today than it has been during any of the past five years. The quality of the profession and the technical base upon which its work is conducted is bound to suffer as a consequence. H. People advocating a phase-out of Federal Training Grant support for air pollution educational programs have often stated that industrial support could be obtained to re- place that withdrawn by Federal agencies. Past experi- ence has shown, however, that industry will only support university research which enables it to improve it~ manufacturing processes and to produce a salable item at lower cost. Most research on air pollution control leads to the development of processes and devices which may increase manufacturing costs. As a result, industrial organizations have been extremely reluctant to support university programs in air pollution control. I. Lack of financial support is causing many air pollution Faculty members to have to assume only a part-time involve- ment in the field of air pollution control. Whereas formerly they were able to devote a portion of their sum- mers to improving and updating their courses, this is no longer possible. Additionally, through interaction with nearby Federal, State and local air pollution con- trol agencies they were able to provide agency staffs with opportunities for continuing education. These efforts have been largely abandoned. Similarly, coopera- tive research projects between State and local agencies and air pollution Faculty members have seen a drastic decrease in recent years. This lack of research has been particularly detrimental to the quality of air pollution educational programs since it was through this type of interaction that Faculty members were able to keep teach- ing programs relevant to current problems. J. The quality of Federal, State, and local programs in air pollution control is directly related to the qualifi- cations of' the people available for employment. Without Federal Training Grant assistance, the.number of people PAGENO="0229" 223 available for such employment will dramatically de- crease. Although economics would tend to indicate that the resulting shortage of people would lead to increased salaries for people working in this field and this situation, in turn, would stimulate more people to study air pollution control at the college level, such a - development will not occur since State and local agencies are, in general, powerless to increase the salaries of personnel engaged in one kind of work without increasing salaries for all persons in the same category (e.g., engineers, chemists, etc.) throughout the merit system. This, of course, is not appropriate and thus does not often happen. As a result, such agencies will be forced to hire non-qualified people to fill the vacancies on their air pollution staffs and the quality of their programs will suffer accordingly. PAGENO="0230" 224 IV. Attitudes on Air Pollution Manpower Development Concerned by the findings of its various studies, members of NAPMDAC have in recent months vigorously pursued a program of meetings with EPA officials, professional organizations, and other groups to press for correction of the observed deficiencies and to seek an increase in support for programs relating to this sub- ject area. As would be expected, the Committee has found that knowledgeable people share our concerns. The EPA Administrator and employees at all levels within EPA air pollution related programs recognize the need for adequate education and training of air pollution control personnel. In fact, the Committee has been informed that officials in the Office of Management and Budget were very much impressed by the vigor and enthusiasm with which EPA officials presented their case to that group in justifi- cation of increased support for air pollution manoower development. In similar fashion, our limited contacts with Congressional of- ficials have indicated an understanding of and a favorable response to our suggestions and recommendations. That the members of NAPMDAC are not alone in their quest for a correction of the current deficiencies is attested to by studies by other groups. Studies by members of related organizations in the water pollution control field have caused these people to reach conclusions supportive to those of NAPMDAC. Other similar conclusions have been reached as a result of studies within EPA itself. For example, in the spring of l97~ EPA officials in the Region IV Office in Atlanta conducted a detailed study to evaluate the effects of the proposed Training Grant phase-out on nineteen programs at thirteen universities within that geographical area. The results of their study caused this group to recommend that "EPA reconsider its policy to phase-out the training grants or provide some alternative funding methods at the same level." PAGENO="0231" 225 NAPMDAC members have also been informed that the General Advisory Committee to the newly formed Energy Research and Development Administration has recently completed a study of manpower `development in the radiation protection field and have concluded that serious problems exist in this related environ- mental area. Additional support for the NAPMDAC position has been provided by resolutions on air pollution manpower matters passed by various professional groups. Examples of such statements are included in Appendix A. These include resolutions passed by the Air Pol- lution Association, the American Society of Mechanical Engineers, and the Association of Local Air Pollution Control Officials. Similar statements of support have been issued by other orgāni- zations such as the State and Territorial Air Pollution Program Administrators. PAGENO="0232" 226 V. A Plan for Action This report has shown that, unless Federal financial sup- port is forthcoming soon, air pollution manpower development within the United States is going to deteriorate to a level where re- covery will be difficult and time consuming. Unless corrective action is taken promptly, the current supply of Master of Science degree graduates is expected to decrease by almost 70% within the next three years. This situation assumes added importance when it is realized that the provision of such people in adequate num- bers and with sufficient education is essential to the Nation's effort to control air pollution, particularly in the face of the current energy shortages. As a minimum for coping with this situation, the National Air Pollution Manpower Development Advisory Committee recommends the following course of action. A. Graduate Air Pollution Training Grant Support Although fellowships and/or traineeships are helpful, sound graduate education in air pollution requires funds for laboratory equipment and supplies and salary support for Faculty and staff. Based upon experience at a variety of universities, it has been found that Training Grant support distributed equally in terms of student funding and university support provides a sound financial basis for conducting a teaching program at the graduate level. Based upon EPA records, it can be estimated that a viable graduate educational program in air pollution control would re- quire a minimum supplementary annual funding of about ~l50,000. It is recommended that the Congress, through the Environmental Protection Agency, provide financial assistance to twelve such Programs in F.Y. 1976 with a progressive increase to twenty-five such pro~rams by F.Y. 1980. Experience has sho~zn that funding at the proposed level will permit a university to develop and PAGENO="0233" 227 maintain a quality program, and at the same time be able to attract sufficient numbers of candidates to make the program competitive and viable. In the main, it is proposed that the traineeshipS provided through such programs be directed to providing Master of Science graduates who can meet the recruiting needs of Federal, State, and local air pollution control agencies. To a limited extent, traineeships should also be provided for a small number of doctoral candidates who, upon graduation, will be available to staff research programs and to serve as Faculty members for col- lege and university programs. To assist in upgrading the quality of air pollution courses at the undergraduate level, the Committee recommends that funds also be provided to two universities to conduct "Summer Institutes in Air Pollution Control." At a total cost of approximately ~l00,0O0, two such Institutes could annually provide four weeks of indepth environmental and air pollution education to approxi- mately 50 undergraduate college teachers. Since the multiplication factor, in terms of spreading the knowledge gained, would be tre- mendous, this would appear to represent a sound investment of Federal resources. In addition to the above, it is recommended that consideration be given by EPA to providing long term research support to six or eight universities selected from among the twenty-five which will ultimately be receiving Air Pollution Training Grants. This would enable each of these universities to develop into a special "center of excellence" within its given geographical area and to carry on long term fundamental research on problems relating to air pollution control. Research support of the type proposed would enhance the teaching programs at these schools and would be of particular value for those programs which offer educational opportunities at the doctoral level. PAGENO="0234" 228 B. Graduate Fellowship Support To meet the graduate educational needs of career em- ployees of State and local air pollution control agencies, it is recommended that the Congress provide funds to support fellow- ships for the equivalent of 70 full-time State and local agency personnel. Such fellowships have proved to be a valuable incen- tive for employees in recent years and, in fact, can be used to assure that the more outstanding employees remain with control agencies. Also to be explored is the extent to which such fellowships can be used to meet the air pollution educational needs of career employees within highway departments and planning agencies. The previously cited NAPMDAC studies have shown an immense need for air pollution education among such groups. In addition, attention should be given to providing similar graduate educational opportunities to career employees of EPA, itself. At present, EPA employees are not eligible for financial support under the EPA Fellowship program. Lastly, it is recommended that an equivalent number of fellowships be provided to support students pursuing inter-dis- ciplinary programs having a strong emphasis on air pollution con- trol. These would include both agency and non-agency employees engaged in programs involving air pollution control and land use planning, environmental law, environmental economics, public policy, and environmental management. C. Support for University Consortia and The Environmental Management Institute During the past several years, EPA officials on an ex- ploratory basis have supported several university consortia by providing a modest amount of funds to a group of universities to serve as a stimulus for promoting cooperative programs in air pollution teaching and research. One such consortium, the New England Consortium on Environmental Protection, has l~ member universities and is currently funded at an annual level of PAGENO="0235" 229 about $150,000. Thus, for an average expenditure of about $10,000 per year per university, EPA has enabledthe participating schools to develop one or more air pollution courses and to share their expertise in this subject area. It is recommended that this program be continued and that funds be added to support four additional such programs in other sections of the Nation. In addition, the Committee recommends continuation of the program represented by the Environmental Management Institute at the University of Southern California in Los Angeles. Graduates of the courses offered under this unique program occupy key posi- tions in air pollution control agencies throughout the Nation. D. Short-Term Technical Training Experience has shown that essentially every professional- level employee within State and local air pollution control agen- cies should have a minimum of one week of short-term technical training per year. This is needed to enable them to keep up with new developments in what is a rapidly changing field, as well as to renew their knowledge in existing areas of expertise. The Committee believes that an increased investment in providing short-term training opportunities for people working in such agencies has the potential for returning substantial benefits in the achievement of reductions in air pollution. It is the recommendation of the members of NAPMDAC that ad- ministration of this program be centralized within EPA inasmuch as it is obvious that it is far more economical to conduct such activities on a well coordinated basis at the Federal level than to try to duplicate such capabilities on a regional or state-wide basis. For this reason, the Committee recommends that considera- tąon be given to providing EPA with the necessary positions to enable then to continue this program. Lest the administrative aspects of the program become dominant, the Committee wished to emphasize its recommendation that efforts PAGENO="0236" 230 be undertaken to expand the present short-course program so as to provide coverage in areas such as program management, manpower planning, development of enabling legislation, training in the public hearing process, automotive inspections, quality assurance, and the assessment of environmental impact statements. To enable the staff to meet these needs, as well as to provide a short- course program which would satisfy 80% to 85% of the training re- quirements of State and local air pollution control agencies, the size of the current EPA Air Pollution Training Institute staff would have to be doubled. The Committee recommends that action be taken to provide such an increase. To assure that adequate attention is directed to the ccllec- tion, analysis, and dissemination of up-to-date information on the supply and demand for technical and professional manpower in air pollution control, and to planning the nature and types of programs required to meet the Nation's needs in this area, the~ Committee recommends that a small cadre of personnel be established within the Environmental Protection Agency to devote their full attention to such problems. Support for this group is suggested at a level of $200,000 for F.Y. 1976 with a gradual increase to $500,000 by F.Y. 1980. PAGENO="0237" 231 VI. Summary and Commentary During the past several years, members of the National Air Pollution Manpower Development Advisory Committee have conducted a series of ongoing studies related to manpower needs in air pollution control. The Committee has also reviewed data assem- bled by other groups in this subject area. On the basis of these efforts, the Committee has concluded that the existing Federal manpower program fails to address many of the problem areas need- ing attention; that the quality of most graduate level university programs is on the decline because of the withdrawal of Federal financial support; that greater effort needs to be exerted in the exDansion and revitalization of the EPA short-course air po~,lution training effort; and that more attention needs to be directed to meeting air pollution educational requirements of State highway departments and planning agencies. Thus, while the need for air pollution education and research are greater now than at any time in our history, funding limita- tions are causing an erosion of the quality of graduate level programs to an extent which threatens to jeopardize the capabil- ities of Federal, State, and local agencies to meet their assigned air pollution control responsibilities. A summary of the recommendations of the National Air Pollution ~`anpower Development Advisory Committee for correcting these deficiencies is presented in Table IX. As may be noted, these recommendations would require an annual Federal expenditure for air pollution manpower development in F.Y. 1976 of approximately 35,650,000. This represents less than 1% of the total EPA budget (exclusive of construction grants) and less than 0.05% of the estimated $12.3 billion annual damage arising through air pollution ~~ąthin the United States. Because the quality of our air pollu- tlon control prograns is a direct reflection of the qualifications of the people who staff them, any lesser expenditure for so vital an area would be unjustified. PAGENO="0238" 232 In formulating the Clean Air Act, the Congress foresaw the need for a strong program in air pollution manpower development. This is exemplified by Section 103 which authoriz~s the EPA Ad- ministrator to provide training relating to the causes, effects, extent, prevention, and control of air pollution and to provide training grants for the advancement of the development program. That the Congress has not changed in this outlook is demonstrated by similar wording in the recent legislation (PL 93_L~38) creating the Energy Research and Development Administration. The intent of the Congress is clear. All that is now needed is a strong effort on the part of those responsible for Federal air pollution control programs to follow the path that has been set down. PAGENO="0239" 233 Table I MEMBERSHIP LIST OF THE ~TATIONAL AIR POLLUTION MANPOWER DEVELOPMENT ADVISORY COMMITTEE Chairman Dade U. Moeller, Ph.D. Associate Director, Kresge Center for Environmental Health School of Public Health Harvard University 665 Huntington Avenue Boston, Massachusetts 02115 Executive Secretary Ronnie E. Townsend, M.P.H. Chief, Office of Academic Training Environmental Protection Agency Research Triangle Park, North Carolina 27711 Donald R. Arkell, B.S. Director Air Pollution Control Division Clark County District Health Department 625 Shadow Lane Las Vegas, Nevada 89106 Charles R. Barden, M.S. Executive Dir~ctor Texas Air Control Board 8520 Shoal Creek Boulevard Austin, Texas 78758 George C. Friedel, M.S. 15 Stephen Terrace Parsippany, New Jersey 070514 Joseph N. Gayles, Ph.D. Department of Chemistry ~orehouse College Atlanta, Georgia 30331 Filton S. Heath, Jr., L.L.B. Professor of Public Law and Government and Associate Director, Institute of Government Thiversity of North Carolina Post Office Box 990 Chapel Hill, North Carolina 275114 Peter U. Hildebrandt, ~M.S. Assistant Director State of Washington Department of Ecology Post Office Box 829 Olympia, Washington 985014 KatherineS. McCarter, M.H.S. Health Educator Department of Health & Mental Hygiene Bureau of Air Quality Control Environmental Health Administration 610 N. Howard Street Baltimore, Maryland 21201 Gerald J. McLindon, Dipl.C.D., M.L.A Dean, School of Environmental Design Louisiana State University Baton Rouge, Louisiana 70803 Sheldon J. Plager, L.L.M. Professor of Law University of Illinois 239 Law Building Champaign, Illinois 61820 Geraldine P. Woods, Ph.D. 12065 Ros.e Marie Lane Los Anglees, California 900149 PAGENO="0240" 234 Table II MAJOR COMPONENTS OF AN AIR POLLUTION MANPOWER DEVELOPMENT PROGRAM 1. Short-term Technical Training A. Programs to upgrade the qualifications of professional control agency employees B. Similar programs for technical supporting staffs 2. Graduate Educational Opportunities A. Long-term educational opportunities for career personnel B. Professional education for future employees C. Air pollution education for people in related professional areas 3. Assistance to States in Manpower Development A. Direct assistance for manpower development planning B. Development of manuals on manpower planning proc edures C. Continuing assessment of air pollution manpower needs ~I. Community Education A. Programs related to public attitudes on environ- mental controls B. Environmental support programs for high school science teachers 5. Career Development of Federal Air Pollution Personnel A. Outside the Agency formal academic training B. Er!rnloyee interchange with other Federal agencies C. Assignments to State and local air pollution agencies PAGENO="0241" 235 Table III SUBJECT AREAS NOT BEING FULLY ADDRESSED BY EXISTING SHORT COURSES 1. Training for Administrators A. Management of air pollution control programs B. Manpower planning C. Development of enabling legislation to meet state objectives in air pollution control 2. Training for Staff Members A. Details of the Public Hearing Process B. Preparation and Evaluation of Environmental Impact Statements C. Quality Assurance for Air Pollution Monitoring Activities D. Assessment and Updating on the State of the Art for Indirect Sources including new source review E. Programs related to public attitudes on environ- mental problems F. Training and supervision of technicians with emphasis on courses for motor vehicle inspectors 3. Training in Interagency Relationships A. Relationships between Land Use Planning and Air Pollution Control B. Transportation Policy Planning C. Economic and Social Aspects of Air Pollution Control Activities 50-194 0 - 75 - 16 PAGENO="0242" 236 Table IV TRENDS IN EPA AIR POLLUTION SHORT COURSE PROGRAM Number of Course Participants Man Weeks of Training Provided Size of Training Program Staff Fiscal Year 1968 1969 1970 1971 1972 1973 19714 1058 2129 2109 2928 3216 3021 2793 987 2123 2197 21481 3610 3730 2162 26 23 22 18 17 17 16 PAGENO="0243" 237 Table V SUMMARY OF FUNDING ALLOCATIONS FOR AIR POLLUTION TRAINING GRANTS F.Y. 1969 through F.Y. 1975 Number of Number of Fiscal Institutions Total - Trainees Assisted Year Supported Funding Tech. B.S. M.S. Ph.D. 69 314 $2,691,000 55 80 129 17 70 140 3,000,000 72 70 155 108 71 ~42 3,375,000 250 100 192 68 72 143 2,600,000 175 50 260 -0- 73 2~4 1,800,000 100 25 2140 -0- 714 18 1,500,000 -0- -0- 180 -0- 75 12 1,200,000 -0- -0- 120 -0- PAGENO="0244" 238 Table VI SCHEDULE OF TERMINATIONS, EPA PHASE-OUT PLAN GRADUATE TRAINING PROGRAMS IN AIR POLLUTION Terminations effective June 3Q,197~ University of Pittsburgh North Carolina State University Johns Hopkins University University of Washington Cooper Union University of Minnesota Terminations to be effective September 3Q, 1975 University of Texas (Houston) Purdue University Howard University University of Kentucky Washington State University University of Massachusetts Drexel University Terminations to be effective June 3Q, 1976 Pennsylvania State University Rutgers University Harvard University Polytechnic Institute of Brooklyn University of North Carolina Georgia Institute of Technology University of Florida University of Cincinnati University of Illinois Oregon State University University of California (Irvine) University of West Virginia PAGENO="0245" 239 Table VII PROJECTED MASTER OF SCIENCE STUDENT ENROLLMENT IN AIR POLLUTION CONTROL - Fiscal Year of ~rai~ii~g_~ 1975 1976 1977 1978 Number of Students Supported 180 120 100* 7Q* by Traineeships Number of Students Supported 70 70 lO** l0~ by Fellowships Total En~'o1lment 250 190 110 80 *In the main, it is assumed these students would be self-. supporting. **Thjs is considered to be the maximum number of students that State agencies would be capable of supporting in long term academic training. PAGENO="0246" 240 Table VIII BUDGETED VACANCIES IN STATE AND LOCAL AIR POLLUTION CONTROL AGENCIES (January, 1975) Number of Vacancies - State - Professionals Technicians Administrative Arkansas 2 0 California 17 2 Delaware 0 0 Idaho 1 0 0 Louisiana 2 0 0 Maryland 17 6 0 Nevada 2 0 0 New Mexico 1 0 0 Oklahoma 3 3 0 Oregon 1 0 0 Pennsylvania 70 25 1 Texas 5 5 0 Washington 0 0 0 Washington, D. C. 5 6 0 West Virginia 10 0 0 TOTAL 1142 51 3 PAGENO="0247" Bud~get Category Graduate Air Pollution Training Grants Graduate Fellowship Support Summer Institutes Consortia and Environ- mental Management Institute Short Term Technical Traąnlng Air Pollution Manpower Development Planning and Assess- merit - Level of Support 12 programs (F.Y. 1976) 25 programs (F.Y. 1980) 70 for Agency Employees 70 for Interdisciplinary Studies 2 per year 3 programs (F.Y. 1976) 5 programs (F.Y. 1980) Provides for doubling of current program Provides separate staff for this activity 241 Table IX PROGRAM SUPPORT RECOMMENDATIONS OF THE NATIONAL AIR POLLUTION MANPOWER DEVELOPMENT ADVISORY COMMITTEE Budget Requirements F.Y. 1976 F.Y. 1980 $1,800,000 $3,750,000 1,000,000 1,000,000 100,000 100,000 550,000 850,000 2,000,000 2,500,000 200,000 500,000 TOTAL $5,650,000 $8,700,000 PAGENO="0248" 242 APPENDIX A POSITION STATEMENT ON FEDERAL SUPPORT FOR AIR POLLUTION MANPOWER DEVELOPMENT, BOARD OF DIRECTORS, AIR POLLUTION CONTROL ASSOCIATION* "\nmerous steps have been takeii in the past year to reduce the federal sup- port for air pollution manpower develop- ment. Other actions have been an- nounced that will seriously jeopardize continuation of this essential function. "Manpower development and train- ing must bc provide(l if the air pollution control program is to he successful. "The Air Pollution Control Associa- tion's Board of Directors is opposed to the deemphasis in manpower develop- ment that is reflected in plans to (liSCOfl- tinue funds for fellowships and support to institutions of higher education, reduction in resources available for direct training and initiation of user charges for attendance at training courses conducted by EPA. "The Board strongly supports con- tinuation of funding for select advanced degree programs, specialty training to meet new program demands, develop- ment and initiation of new short courses and continuation of EPA's direct train- ing program without user charges." *Journal of the Air Pollution Control Association, Vol. 214, No. 8, page 790 (August, 19714). PAGENO="0249" 243 STATEMENT URGING CONTINUING FEDERAL SUPPORT OF EDUCATION AND TRAINING IN THE AIR POLLUTION FIELD AMERICAN SOCIETY OF MECHANICAL ENGINEERS The Air Pollution Control Division of the ASME, at its meeting in Denver, June 12, l97~, considered the growing complexity of the air quality conservation field and the continuing and expanding need for trained professionals in State, local, and Federal Govern- ments, industry, and academia. It was concluded that the need for well trained people will be greater in the future than it has been in the past. The Executive Committee of the Air Pollution Control Diyision, ASME has learned of recent discussions and planned future actions of the Federal Government to reduce support of manpower training and development activities, namely fellowships for State and local control agency personnel, university graduate training grants and fees imposed on attendees of short term training courses conducted by the USEPA. These actions are extremely inconsistent with the continuing need for trained manpower in the pollution control field. The Executive Committee of the Air Pollution Control Division, ASME urges the U.S. Environmental Protection Agency, the Office of Management and Budget, and all others concerned to enhance and ex- pand manpower training activities, and to reverse the above mentioned actions. The public interest must be protected by insuring that qualified individuals are available to work in and manage the tech- nically complex and costly pollution control activities in all sectors of society. Unanimously adopted by the Executive Committee, Air Pollution Control Division, ASME, June 12, 19714. Unanimously adopted by the ASME Policy Board (representing eight additional technical divisions within ASME) on November 18, 19714. PAGENO="0250" 244 RESOLUTION ADOPTED BY THE ASSOCIATION OF LOCAL AIR POLLUTION CONTROL OFFICIALS June 9, l97~4 Denver, Colorado The Association of Local Air Pollution Control Officials opposes the transfer of training costs to local agency program costs and endorses the continua- tion by the EPA of formal educational fellowship stipends. PAGENO="0251" 245 1- -. !( ITY OF CJH~CAt~O OEP~'~T~1ENT OF ENVIRONMENTAL CONTWL March 6 1975 H. W. POSTON Senator Edward Muskie, Chairman of the Environmental Pollution Subcommittee Senate Public Works Committee Room 4204 - New Senate Office Building Washington, D.C. 20510 Dear Senator Muskie: This letter is written to express the concern of ALAPCO (Association of Local Air Pollution Control Officials who represent 34 million citizens through 29 city/county agencies) over the 1976 budget request submitted by the Executive Department for the Environmental Protection Agency. As you are aware, this budget request reflects a twelve million dullar decrease from the 1975 budget. It is the opinion of the ALAPCO Board of Directors that the proposed budget request is not consistent with the financial support required for the cooperative federal, state and local activity necessary to achieve the congressional mandate for clean air as expressed in the Federal Air Quality Standards. The local governments represented in the ALAPCO organization have an ever increasing range of activities to improve air quality in the nation's urban areas/ the major air quality problem areas. These include control of automotive and other transportation sources, air quality maintenance planning and controlof complex sources. In addition, current program activities are being expanded to provide better data from which to determine program effectiveness and reduce emissions from known point sources. A significant and in some situations a major source of financial support for these local activities is the grant program of the federal government. A curtailment of funding support would seriously restrict continuation of these enforcement programs where they are needed most -- and where the results are most telling. The proposed budget request when considered in the light of inflationary cost increases, and expanding program activity, including state and local governments will result in a significant decrease in the financial support afforded by the current levels of grant funding to state and local agencies, even though the 320 North Clark Street C'rca9o, Illinois 60610 Phone Area Code 312 744-3430 PAGENO="0252" 246 Page Two . March 6, 1975 Senator Edward Muskie dollar amount by a budgeting device will remain the same, i.e. $51.5 million. As an example, the grant funds made available to the City of Chicago decreased from $1.1 million in 1970 to $.7 million in 1974; under the proposed budget, further reductions in grant funding will be required. Local air pollution control programs have mode significant contributions to improvement of air quality, they have been innovative and provided leadership - witness Los Angeles in control of solvent emissions, Chicago in auto emission testing and in the Detroit-Wayne County area where all steel and coke-making operations are under abatement programs. Funds spent in local air pollution control activities impact directly in air quality improvement. As an example of the need for additional grant funding, the City of Chicago expends $2.5 million per year on its inspection/maintenance portion of the Transportation Control Plan for the city, augmented by no federal or state funds. The implementation of similar inspection/maintenance programs would alone require an estimated 100 percent increase in the grant funding portion of the fiscal 1976 budget request. The need is further supported by a recent nation- wide survey which revealed that environmental control remains one of the four top issues of molar concern amongst United States citizens. We, the Board of Directors of ALAPCO, urge your committee to increase the grant portion of the proposed fiscal year 1976 Environmental Protection Agency Air Pollution Control Budget by a minimum of $50 million. In addition, present federal regulations that call for a loss of eligibility by a local agency for a grant when the amount of local fund expenditures drops below the level of the preceding year, should be modified to permit federal grant support with reduced local expenditures to at ~ast the same percentage of contribution as the previous year. We wish to advise the committee that we are prepared to submit supporting documentation at the committees request. Respectively submitted, LL~ P~ President, ALAPCO PAGENO="0253" BU1M~ET REVIEW FEDERAL DISASTER ASSISTANCE ADMINISTRATION AND ECONOMIC DEVELOPMENT ADMINISTRATION TUESDAY, MARCH 4, 1975 U.S. SENATE, COMMITTEE ON PUBLIC WORKS, Washington, D.C. The committee met at 10 a.m., pursuant to recess, in room 4200, Dirksen Senate Office Building, Hon. Jennings Randolph {chairman of the committee] presiding. Present: Senators Randolph, Montoya, Burdick, Morgan, Hart, Baker, Stafford, McClure, and Domenici. OPENING STATEMENT OP HON. JENNINGS RANDOLPH, U.S. SENATOR PROM THE STATE OP WEST VIRGINIA The CHAIRMAN. This is the fourth day of our hearings to review the budget requests of the agencies whose programs come within the jurisdiction of the Public Works Committee. We are going to discuss today with our witnesses the Federal Disaster Assistance Administration and the various bodies that work in the field of economic development. I know that Senator Baker and I and others on the committee understand the difficulty of predicting the level of expenditures for disaster relief. We know that it is not easy to set what could be or should be spent within 1 given year because of the suddenness with which the disasters strike and the impact and the amounts of money that are needed. But we do know that communities and citizens who are stricken by disaster need our help. So our discussion with the disaster agency must be of a more general nature than with other agencies. We developed, as you know, gentlemen, the broad legislation under which disaster assistance is provided and we know that, as I have indicated, it is impossible to know the spending requirements that will occur in this area. I am particularly glad to have with us representatives of the Department of Commerce, the Appalachian Regional Commissrnn and the Title V Regional Commissions. (247) PAGENO="0254" 248 Senator Domenici, who is here this morning, has been keenly inter- ested in the economic development program and we shall draw on his study in developing the programs in the future. We do realize that there is the added factor of the recession, of unemployment, of the need to help people in providing job oppor- tunities that perhaps can be created within certain of these programs. We do believe that the agencies, with the authority that has been given to them, can make considerable contributions to our national recovery effort. We will, of course, draw on the experience and background of Senator Burdick who will formally chair today's meeting. We will review with the agencies the relationship of their work to the anti-recession activities because as I have indicated, this is a new element. We will want to discuss title X of the Public Works and Economic Development Act and, of course, the possible implementa- tion of the provisions of that law. We are gratified that we have witnesses today who will help us by their statements and in colloquy with members. Senator Morgan has come into the hearing. We are appreciative of his continuing interest. I will ask you, Chairman Quentin Burdick, if you would take the Chair and proceed in the calling of the witnesses and the conducting of the hearing. OPENING STATEMENT OP HON. QUENTIN N. BURDICK, U.S. SENATOR PROM THE STATE OP NORTH DAKOTA Senator BURDICK (presiding). The hearing this morning has been called to obtain information on the fiscal year 1976 budget request for programs authorized by Public Law 93-288, the Disaster Relief Act Amendments of 1974. This session is a part of a new procedure outlined by the Congres- sional Budget Act of 1974 and represents an effort on the part of a standing committee to review and report on the budgetary and eco- nomic impacts of the programs over which it has legislative jurisdic- tion. I think that the procedure will be of value and I am proud that the Public Works Committee has taken a lead in charting these unexplored waters. Our Chairman, Senator Jennings Randolph, deserves much applause for this endeavor. This morning, Thomas Dunne, Administrator of the Federal Dis- aster Assistance Administration, William Crockett, his deputy and Robert Volland, chief of their financial management office have been called to testify with respect to the budget request for the President's Disaster Fund and title V of Public Law 93-288 which added title VIII to the Public Works and Economic Act. Included in the President's Disaster Fund is the money to help States prepare and maintain disaster preparedness programs, to pro- vide for the repair and restoration of damaged facilities, to pay for the Federal share of the individual and family grant program, and to provide for the panoply of emergency relief assistance authorized under the act. Up to 3 percent can be used for administrative expenses. Title VIII would fund Recovery Planning Council grants, loans and loan guarantees to help restore the economic base to an area devastated by a natural occurrence. PAGENO="0255" 249 The former has a "no year" open ended budgetary authority and $150 million has been requested by the President for fiscal year 1976. This is $50 million less than the total amount appropriated last year. Title VIII has a "no year" authorization but is limited to $250 mil- lion. No money has been requested for this program but up to $10 million of the money which has been requested for the Department of Commerce's Economic Adjustment Program can be used in natural disaster areas. This is title IX of the Public Works and Economic Development Act. I confess that this budgetary procedure interests me greatly and perhaps we can explore the administration's view of the relationship between titles VIII and IX this morning. Does any member of the committee have a statement at this time? Senator DOMENICI. Mr. Chairman, I have a statement; but since we are running out of time, I would ask it be placed in the record. I want to join with the chairman in expressing my great appreciation for the way the agencies have cooperated in these early hearings and I am sure they are going to be likewise today. I want to get on with the disaster questions because I believe I have to leave. Since you and I participated mostly in that, I prefer to make no additional statement at this time, but rather to get on to the inquiring of Mr. Dunne. Thank you, Mr. Chairman. [Senator Domenici's statement follows :} STATEMENT OF HON. PETE V. D0MENIcI, U.S. SENATOR FROM THE STATE OF NEW MEXICO I am pleased to join you this morning, Mr. Chairman, to receive testimony from the Federal Disaster Assistance Administration on the agency's proposed budget request for FY 1976. Today's hearing is part of the Committee's effort to fulifihl its role under the Budget Reform Act. This hearing is not a full oversight hearing on implementa- tion of the 1974 Act. Neither do we seek to serve the role of the Appropriations Committee. Under the Budget Reform Act, each Committee will have an oppor- tunity to give its views and estimate on all matters in the budget resolution which relate to its jurisdiction and the outlays which it expects to result from the opera- tion of its programs. The Federal Disaster Assistance Administration is responsible for the major federal disaster relief program. The funding arrangements for this program are rather unique for a federal program, and I believe it is important for the Com- mittee to have a better understanding of the costs of this relief effort, how they compare to the cost of all federal disaster relief and its impact on the budget. These budget hearings have provided the Committee much valuable information and I want to acknowledge the splendid cooperation the Committee staff has received from the agencies in organizing these hearings. Senator BURDICK. The first witness this morning will be Mr. Dunne. Welcome to the committee. STATEMENT OF THOMAS P. DUN1'TE, ADMINISTRATOR, FEDERAL DISASTER ASSISTANCE ADMINISTRATION, ACCOMPANIED BY WILLIAM E. CROCKETT, DEPUTY ADMINISTRATOR, AND ROBERT H. VOLLAND, CHIEF, FINANCIAL MANAGEMENT STAFF Mr. DUNNE. Thank you, Senator. In the interest of time, with y our permission, I would like to submit my statement for the record and very briefly summarize it. Senator BURDICK. It will be received in full for the record without objection. [See p. 266.] PAGENO="0256" 250 Mr. DUNNE. Mr. Chairman, we are operating, as you know, under a relatively new statute which your committee authorized. So far, we have only fragmentary information in terms of how it will impact on the budget in future years. Traditionally, our appropriation has been a no-year fund and for fiscal year 1976, we are requesting $150 million. As you have mentioned, it is always very difficult to determine exactly how much money will be needed in a given year, because we never know how many disasters will be declared and what the severity and the magnitude of the disasters will be. So we have worked with historical data to try to come up with the best estimate as to how much major disasters and emergencies will cost in a normal year. In previous years when we needed more money, the Congress has always been very generous when on a number, of occasions, we have appeared before Congress requesting supplemental appropriations. With that, I would like to conclude my remarks. I hope I can answer any questions you may have. Senator BIJRDICK. Could you explain to the committee how your budget obligations are incurred and how these affect your outlay estimates for each year? In this connection, I note while you requested $150 million, you estimated an actual outlay of $250 mfflion. Mr. DUNNE. Yes, Senator. Let me take the obligation part of the question first. Basically, our obligations come about because of the declaration of major disasters. About 79 percent of the funds go to local and State governments. They are provided under project appli- cations. We can advance funds. As an administrative course of action, we never advance more than 75 percent because we never want to be put in the position of overpaying somebody and then having to go back and recover the funds. The other part of our obligations are incurred by other Federal agencies who act as our agents. Typical examples of that would be the Department of Housing and Urban Development's regional offices, which incur obligations repaid from the President's fund to provide temporary housing. Another example is the Department of Labor which, under a delegation of authority from the Secretary of HUD, incurs obligations for unemployment compensation. In terms of outlays, they occur only as fast as other Federal agencies or local or State applicants draw their money down and conclude the projects. We had envisioned after the Hurricane Agnes situation in June of 1972, that we would have a resulting cluster of outlays, but what has happened in the last 2 years is that construction or reconstruction has been financed at a more level pace. We anticipate now with the obliga- tions that have been incurred and the money that has not previously been outlayed, that our outlays for fiscal year 1976 will be approxi- mately $250 million. Senator BURDICK. Suppose we have a series of disasters and we eat up the $150 million in a hurry, how does this affect your outlays? Mr. DUNNE. The outlays in fiscal 1976 will primarily reflect obliga- tions in fiscal 1974 and fiscal 1975. The obligations that will be incurred in fiscal 1976 will show in the outlay section primarily in fiscal years 1977-78. Senator BURDICK. Your title II authority is very broad. What are your plans for fiscal year 1976 for spending on disaster research, for PAGENO="0257" 251 example? Can you supply a figure as to your planned outlays for the other categories listed in section 201? Mr. DIJNNE. We could provide a figure on section 2, title II of the act. Obligations under title II for State preparedness grants would be the bulk of the money we will obligate in fiscal year 1975. That money will be drawn down on a quarterly or semiannual basis by the States, depending upon what their contract calls for. We feel that most of the outlays from the potential $14 million to $15 million in obligations will take from 2 to 3 years. In terms of research, Mr. Chairman, the majority of our research can be handled by the Department of Housing and Urban Develop- ment's research group with which we work very closely. We don't anticipate a large amount of expenditure for research from the disaster relief fund. Senator BURDICK. What about the other categories under section 201? Mr. DUNNE. As I said, the two main parts of title II that we will be spending money would be for the State preparedness grants and for the limited study efforts that we go into. Training and exercises, as far as the States are concerned, are covered under the disaster pre- paredness grants. Training for our own personnel or for State personnel in Federal disaster relief operations is funded out of our regular operat- ing and administrative budget. Senator BURDICK. How many applications for the $250,000 grant have actually been received and how many have received the money under the applications? Mr. DUNNE. We have received as of last night 49 applications out of a potential 55. Seven of those grants have been approved. We hope all 55 that are eligible will come in, and we would expect that most of those would be approved within the next 4 to 6 weeks. Some of the States have had a more difficult time coming up with a program for use of the planning grant. We are working very closely with them, giving technical assistance and advice to help them de- velop their work programs. My guess would be that before May 22, which is the last date for the applications, that everybody who wants to be in the program will have applied. Senator BURDICK. How many States are involved in those applications? Mr. DUNNE. Forty-five out of the fifty. There are five States so far that have not made application. I assume in most of those cases there are new Governors with new staff personnel who have not been able to focus in on this area. Last night, I wrote to the regional directors who cover these par- ticular States and told them to make sure that they go back to the States and inform the Governors that this planning grant money is available and that May 22 will be the last date for them to apply. Senator BURDICK. Seven of them have already received their money? Mr. DUNNE. Seven have their grant applications approved. I don't know whether or not they have actually received any money. We have obligated $1,626,000. Senator BURDICK. Could you tell me how much discretionary money has been applied to the disaster areas under section 313 in the past fiscal year? If you don't have the figure, you can supply it. 50-194 0 - 75 - 17 PAGENO="0258" 22 Mr. DUNNE. We don't have the figures, Mr. Chairman. We will try to supply that. [The following was supplied in accordance with the above request:] The provisions of section 313 were not implemented during fiscal year 1974. Such priority attention as was appropriate was given by the agencies under their own authorities. Senator BURDICK. I presume that the in-lieu contributions pro- gram under section 419 is doing well. How much have you spent under this section and what total is this of your disaster applications? Mr. DUNNE. We have had a good reception of section 419. We have some sample data in terms of processing time which is still fragmentary. We think, based on a limited sample, that we have cut down the processing time up to 88 percent. This means that money is getting out to the applicants much faster. I don't have a total of how many applications have been approved under this section, but it is 71 percent of the total applications that have been received since April 1, 1974, when this became effective. Senator BURDICK. Would you supply those figures? The nod, I presume, means yes. Mr. DUNNE. We can get it out of the computer. [The figures requested follow:] COMPARISON OF PROJECT APPLICATIONS APPROVED UNDER SEC. 419 WITH ALL APPROVED APPLICATIONS 1 Number of approved applications Percentage Funds obligated (thousands) Percentage Under $25,000 Over$25,000 Total 938 377 71.3 28.7 $7,136 57,946 11 89 1, 315 100. 0 65, 082 100 I During period Apr. 1, 1974 to Feb. 24, 1975. Senator BURDICK. In your statement, you said you spent $16.7 million for individual and family grants under section 408. I presume this represents 75 percent of the money actually distributed to dis- aster victims. What has been the per capita expenditure and how many people have been aided? Can you give a comment as to the financial efficiency of section 408 as compared to the old foregiveness program? Mr. DUNNE. Could I run down some figures that will give you a comprehensive view? We have had 31 maj or disasters in which section 408 assistance has been requested by 18 States. Seven States have asked for this assistance in more than one disaster. Some of the re- quest were under the retroactive features of this section. So far, the number of disaster victims who have applied for indi- vidual and family grants totals over 18,000. Over 2,000 have either withdrawn or been denied. There have been 5,144 grants approved. So far, funds have been approved for $8,277,000. The average grant has amounted to $1,609. The principal needs of the disaster victims being met by this particular section of law are for repair of homes, re- placement of furniture and appliances, replacement of clothing, and payment of medical expenses. The $16.7 million would include the Federal share, and the amount advanced to a number of States because they did not have a set-aside PAGENO="0259" 25B appropriation to meet their share. The States have put in writing that they will repay the Federal Government when they get the opportunity. Senator BURDICK. Is money advanced for the States' share? Mr. DUNNE. Yes. We have advanced money for the States' share, which is allowed by the statute. Senator BURDICK. To what extent have the States come up with 25 percent at this time? Mr. DUNNE. About 11 out of the 31 disasters. Senator D0MENIcI. What does that mean in dollars? That could. mean 5 percent or 80 percent of your present expenditure depending. Mr. DUNNE. No. I meant that they have come up with their 25- percent match. Senator D0MENIcI. I know, but when you relate disasters, when you answer the question disasters, you are not talking about the percentage of dollars. We don't know the size of the disaster. But the question relates and as I understand it, we would like to know if very many States are coming up with their 25 percent or is it almost all being advanced to them under the loan provisions? Is that not what you were looking for, Mr. Chairman? Senator BURDICK. Yes. Mr. DUNNE. Five out of the eighteen States that have used this section have come up with their own funds to meet their 25 percent share. So the other 13 States have been advanced their 25 percent. Senator D0MENIcI. Could you give us a dollar percent that six rep- resents? Would it be a half, a third? Mr. DUNNE. I would prefer to submit that for the record. Senator D0MENIcI. Would you do that? Mr. DUNNE. Yes, sir. [The information requested follows:] Through February 21, 1975, funds advanced against the States' share under section 408 amounted to $3.2 million. This amount represents approximately 18 percent of the total funds obligated (including both Federal and States' shares) Senator BURDICK. When you advance the 75 percent, what assurance do you receive or do you require that States put up their 25 percent? Mr. DtTNNE. The Governor himself certifies in writing that he will take certain actions to repay the Federal Government. In some cases, it has meant going to a State legislature and asking for an appropri- ation; sometimes it means an Executive order will have to be issued; sometimes both an authorization and an appropriation are required. We now are looking for the Governors to give us specific dates when they anticipate they will be able to pay back the Federal advance of the State share. Senator BURDICK. What would be the situation if the legislature of that particular State did not come up with the necessary matching money and suppose that 2 or 3 years from now there was another demand for money? What would you do about it? Mr. DUNNE. We have discussed this at great length. We would remind the Governor or the State that they had given us a promise to repay that money. The statute, incidentally, says repayment will be made when such State is able to do so. Inability has got to be separated from unwillingness. But we could withhold funds, or refuse PAGENO="0260" 254 to make further advances under that section. The Governor is going to have to answer to the people of the State when he cannot implement the Individual and Family Grant program. Senator BURDICK. This is the core of the new legislation, that there will be a cooperative effort between the Federal Government and the States. But if the Federal Government is still going to come in and do all of the funding, then our theory isn't working out very well. Mr. DUNNE. We agree. Senator BURDICK. Maybe you ought to take a look at this and see how we can get better cooperation. The theory was that the Governor of the State where the disaster occurred has a better feel of what is needed than perhaps the Federal Government and therefore, should participate semiannually. That was the idea behind the whole thing. Mr. DUNNE. We agree. I believe that the States that have requested advances and promised repayment have done so in good faith. Of course, that is the problem we may have to face at a later date. So far, we haven't had the problem. Senator BURDICK. I would like to ask you a couple of questions about the administration of the program. I would be interested in knowing how you use some of the administrative budget. You have an Emergency Information Office, a Public Assistance Division, a Preparedness Division and Individual Assistance Division. Addi- tionally, I notice four or five specialized office groupings within your organization such as Mr. Volland's financial management staff. Could you tell us how you spread your administrative budget among your major departments? For example, how much do you spend for your Preparedness Division as opposed to staffing and managing the Public Assistance Division? If that is too difficult at this particular time, could you provide these figures for the record? Mr. DUNNE. We would like to provide the information for the record, Mr. Chairman. [The information follows:] DISTRIBUTION OF FDAA STAFF EXPENSES BY ORGANIZATION ELEMENT FISCAL YEARS 1974-76 [In thousands of dollarsj Fiscal year- 1975 1976 1974 (estimate) (estimate) Office of the Administrator 194 182 184 Emergsncy Information Office Assistant Administrator for Management Preparedness Division Public Assistance Division 70 75 1, 038 316 81 75 1, 283 349 89 77 607 361 Individual Assistance Division 259 310 326 Program support staff Reports and evaluation staff Financial management staff Regional offices Agencywide costs Total administrative costs 223 387 172 2, 800 534 212 580 180 2, 851 737 221 616 187 3, 165 4~ 6, 068 6, 840 6, 300 This distribution is based on actual and estimated personnel and travel costs for each organization unit in the years indicated. In addition, actual and estimated expenses of the Preparedness Division and the Reports and Evaluation Staff con- PAGENO="0261" 255 tam costs associated with studies efforts and computer support functions, re- spectively, as follows: tin thousands of dollarsj Fiscal year- 1975 1976 1974 (estimate) (esttimate) Studies 920 240 Computer support 84 285 285 Agency-wide costs are those which are not readily assigned to a specific organi- zation unit, and include rents, communications and utilities, printing, miscellane- ous services, and supplies and equipment. Senator BURDICK. Do you have sufficient personne' to fulfill your functions? Do you have enough people to help issue prevention and preparedness plans? Is your staff capable of giving technical advice when and where requested? Do you have all of that expertise? Mr. DTJNNE. I don't think it is just a matter of sheer numbers. We were authorized in fiscal 1975 to add 39 permanent positions. We have assigned 32 of these positions to the field and 7 to Washington. After last spring, we felt we needed additional strength in the regional offices. That is where the action is. We believe that we have enough permanent personnel and have made no additiona' request for fiscal 1976. As you know, our law allows us to augment our staffs during a disaster situation by the use of temporary employees. We do use that authority. I don't believe we have any people problems coming into the fiscal year 1976. Senator BURDICK. Senator Domenici, would you like to ask some questions? Senator D0MENIcI. I know we have a lot of ground to cover this morning. I just want to ask a few questions. It seems to me the chairman is correct that the major change in the law is section 408. Youi explanation would lead me to believe that not only are the average grants much smaller than the series of forgivenesses we had over the previous 4 or 5 years, including up to $5,000, but-and I am wondering-because we put the match in and turned the program over to the Governors, that we are just not getting any effect in the field, that people are just not using the program. Or are we serving the screening purpose intended by the Congress so the program will not be a giveaway program, but really help people in need. What would your observation about that be? Mr. DUNNE. It is not a giveaway program. It is costing substan- tially less than the forgiveness feature under SBA. We could supply information as to what SBA estimates their program would have cost with forgiveness, given the same number of disasters. What we are finding when we get down to serious need or necessary expense remaining after the utilization of other governmental authori- ties such as the SBA loan program, is that a program to meet those needs is best administered by the State and not the Federal Govern- ment. It is much more equitable to the disaster victim and, of course, it does save the Federal Government money. But, Senator, this is a new section. The law was enacted May 22, 1974. We had to go back and pick up retroactively disasters of April 1, PAGENO="0262" 256 1974. But that series of tornado disasters that occurred in the spring of 1974 had already been covered by an SBA declaration. SBA's 60- day limit for submitting loan applications had expired by the time we were ready to implement 408. So we approved some things that we will not be picking up in the future, when all assistance will run concurrently. So I can present documentation that we have received back from the States, disaster by disaster, but I don't think that is going to tell us the story. I honestly feel we will need another year of experience under this section to see whether or not it is going to meet the needs of the people, and whether or not from a budgetary standpoint it is indeed a good thing for the Federal Government to be entering into this kind of relationship with the States. I just think time is going to tell. Senator D0MENIcI. It appears to me with reference to the advanced grant provision where you loan the State the money to carry out the program that you are under a very serious responsibility to evaluate whether or not the Federal Government is being taken or whether there is a good-faith effort on the part of the States. I think regular reporting to the Public Works Committee on which States are indeed coming up with their 25 percent or paying back the advance is very relevant as to whether this program will work. At this point I agree with you that it is too early to say the States are not going to meet their share of the cost, but if you establish a pattern over a couple of years of not insisting that they come up with the match, then I think we have basically a 100-percent grant program. We really want a 25-percent match in there so the States will be financially concerned about the kind of assistance they give. That is the theory we developed and I think it is very important you keep us abreast of the situation. With reference to the preparedness planning, I believe it has been a boondoggle in the past. The Government has spent a lot of money trying to help the States prepare but when we had a fairly serious or large disaster, there was little or no preparation in most cases. What makes you think the new approach in title II is going to be any better? Do you have any preliminary evidence the States are serious about this 100-percent grant we are going to give them and are they going to be in a position to implement sections like 408 be- cause they develop a preparedness plan or are we going to be right back where we were before? Mr. DUNNE. I think in the first place, FDAA appropriately is taking a more critical view of these preparedness grants than it took under the former program when the States were putting up 50 percent. We are serious enough that I won't allow a regional director to approve his first State grant until he comes in and talks to Mr. Crockett and me. We want to be sure that the provisions of Public Law 93-288 are adequately addressed in a uniform manner in all regions. I think it is worthwhile to note that the vast majority of States never took this seriously before and most of them are operating under old 1950 or 1952 civil defense laws. I think that the States are much more serious, now. I think that the governor's personal staff and in PAGENO="0263" 257 some cases the governor himself knows that this grant is available and has taken a personal interest. We are getting a much better product now in terms of the problems which need to be addressed. But whether this will mean better pre- paredness only time will tell. I have told my regional people this is probably the last chance that we ever are going to get to have the States prepare their programs and procedures to work in coordination and uniformity with the Federal Government when the President declares either an emergency or major disaster. That word has been put out to the States. I have addressed the States' civil defense directors recently and intend to address them again with Mr. Crockett in the next 2 weeks. Preparedness is one of the features of the law that we want to address very specifically. Senator D0MENIcI. I would assume, with reference to planning, that you have developed some rather detailed regulations and ap- plication forms. I wonder if you would make those available as part of this record for the staff to see how you are implementing that section in terms of your relationship with the States? Mr. DIJNNE. Yes, sir. [The information relative to forms, applications, and regulations appear at p. 276.] Senator D0MENIcI. Concerning your statement, you indicate that only about 42 percent of all disaster assistance came out of the Presi- dent's emergency relief fund. Is this percentage fairly consistent over a period of time? Mr. DUNNE. Yes. It is. The other Federal agencies which are heavily involved-I won't go into all the agencies-are SBA, the Department of Agriculture under its separate authorities, the Corps of Engineers under Public Law 99, the Federal Highway Administra- tion and the Department of Health, Education, and Welfare. Those are the five main departments or agencies that have author- ity to provide money in addition to the President's Disaster Relief Fund. Senator D0MENIcI. One last question: The other change we made in the law of some significance had to do with granting permission to block the small public facilities projects which had amounted to a substantial percentage of the total program. You have hundreds of applications for small projects. We have permitted the pooling of them. It might be too early to know whether this is having any effect on your ability to administer the grants and whether it has had any effect in expediting these small ones. I think the pooling limit is $25,000 and your testimony was that this limit would cover as many as 75 percent of all the grant applications you have been receiving. Do you know anything about that effect? Mr. DUNNE. First of all, we hear that the States are very receptive to this and wish the figure were much more than $25,000. We concur. As you know, I recently testified that I was in favor of bloc grants in all cases. Just let me read a sample of what we have looked at. We looked at 1,315 project applications that have been approved since April 1, 1974. 936 of the 1,315, or 71 percent, were for $25,000 or less. However, it is only 10 percent of the dollars. PAGENO="0264" 258 We were so much in favor of this section because we were spending as much time on 10 percent of the money as we were on the other 90 percent, since it represented such a very high percentage of the total project applications. Looking at a very small random sample, we took five project applications for each of three disasters that were declared under Public Law 91-606. The average time from project application approval to final payment was 361 days. We then took five project applications for each of three disasters decinred under Public Law 93-288. and that average time was 44 days. If these percentages hold up for more than the random sample, it means that processing time has been reduced by 88 percent. We think this is very favorable. Senator D0MENIcI. Do you have a next series? You indicate the $25,000 which we agreed upon might not be the best figure. What would $50,000 do to all of those figures? Mr. DUNNE. We have the information. We will furnish it. Senator D0MEN1c1. Could you supply it for us? We might seriously consider a higher figure. Mr. DUNNE. We hope you consider at least $100,000 as the minimum. [The information follows:] CATEGORIZATION OF APPROVED PROJECT APPLI CATIONS Number of approved applications Percentage Funds obligated (thousands) Percentage Under$25,000 $25,000 to $50,000 $50,000 to $100,000 Over $100,000 Total 938 151 116 110 71.3 11. 5 8. 8 8. 4 $7,136 5, 485 8, 152 44, 309 11.0 8. 4 12. 5 68. 1 1, 315 100. 0 65, 082 100. 0 This analysis, based on all project applications approved in the period April 1, 1974-February 24, 1975, indicates that project applications approved in amounts of $50,000 or less comprise 82.8 percent of the total applications approved, while representing only 19.4 percent of the total funds obligated. Project applications approved in amounts of $100,000 or less represent 91.6 percent of the total ap- plications approved, and represent 31.9 percent of the total funds obligated. As indicated, approximately 8.5 percent of the applications approved contain 68 percent of the total funds obligated. Senator D0MENIcI. Thank you, Mr. Chairman. Senator BURDIcK. Senator Montoya? Senator MONTOYA. What has been the average appropriation for disaster relief in the last 3 years? I know I handled this in the Ap- propriations Committee. I know for Hurricane Agnes we appropriated close to $1 billion. Mr. DUNNE. For the President's Disaster Relief Fund, we initially always asked for $100 million. We have often had to come in for supplemental appropriations and for budget amendments. Senator MONTOYA. That is what I mean. You come in for a normal appropriation of about $150 million. Then every time there is a dis- aster you come in for a supplemental. So will you give me the average combined conventional appropriation and supplemental during the course of the last 3 or 4 years? PAGENO="0265" 259 Mr. DUNNE. Senator, I will supply that for the record. I have only the figures starting in 1972. Senator MONTOYA. Will you submit that for the record? Mr. DUNNE. Yes, I will. [The information requested follows:] Appropriations for the last three fiscal years have been as follows (dollars in thousands): Fiscal year: 1973 $592, 500 1974 432, 600 1975 200, 000 The average for these years is approximately $408.4 million. Senator MONTOYA. If my memory serves me right I think the average appropriations which include the regular and the supple- mental has been close to $400 million during the course of the last 4 years with the year of Hurricane Agnes being the highest year. Mr. DUNNE. I think that the 1974 actual appropriation was one of the biggest that we have ever had. It was $432,600,000. For fiscal 1975, the appropriation is $200 million. We are going to go into fiscal 1976 with carryover money. When you are estimating for the future tropical storm Agnes costs should be counted at least 60 percent. Some feel 80 percent. We have never asked for more than $100 million initially. That was the basic 1974 request. Later there was a $300 million budget amendment and the Senate initiated a $32.6 million supplemental without the request of the administration. Senator MONTOYA. In fact, I opposed the initial effort of the Senate to augment the appropriation, but at the insistence of Senator Scott and a few others from the Pennsylvania region the Senate finally went along with them. I reluctantly did, too. That is why we had such a big appropriation. You have for 1975 a budget estimate of $275 million. Is that correct? Or $200 million? Which is it? Mr. DUNNE. Outlays? Senator MONTOYA. No. For 1976, it is $150 million. Is that correct? Mr. DUNNE. Yes. Senator JV[0NT0YA. How much in carryover funds do you have because these are no year appropriations? Mr. DUNNE. We estimate we will carry over a minimum of $40 million. Senator MONTOYA. I don't recall that this last year you asked for a supplemental. Did you? Mr. DUNNE. Yes, we did. We asked for initially $100 million and we added a budget amendment of $100 million. Senator MONTOYA. $200 million total? Mr. DUNNE. $200 million total. Senator MONTOYA. If there is a disaster, of course, you will come in for a supplemental. Mr. DUNNE. If we have an extremely large one, yes. Senator MONTOYA. Will you tell us how you coordinate with the Small Business Administration and othei agencies in handling disaster? Mr. DUNNE. Coordination takes place as soon as an incident occurs. We receive a request from the Governor. Our regional offices contact other Federal agencies who do the damage surveys. SBA looks at PAGENO="0266" 260 both business and home damages, and estimates the potential number of homes that will need loans. We take a look at the insurance coverage. We involve the Depart- ment of Housing and Urban Development in terms of housing, the Department of Labor, the Corps of Engineers, the Federal Highway Administration, HEW, and others, depending upon the type of damage that is significant. Once a declaration is made by the President a Federal coordinating officer is appointed to exercise the President's authority for the direction and coordination of Federal agencies providing disaster assistance. Senator MONTOYA. Who is the real catalyst in this? Your agency or the Governor of the State? Mr. DUNNE. Nothing can take place without the Governor's request. When we go into the State after a declaration we join forces with the Governor to coordinate the Federal efforts with the State and local efforts and with the volunteer agencies. From the standpoint of the Federal Government, the Federal coordinating officer, who is usually a member of my agency, is the catalyst for the Federal efforts. The Governor names a State co- ordinating officer and quite frequently the two coordinating officers are housed in the same space. Senator MONTOYA. What is your policy by way of expedition of applications with respect to localized disaster such as a hurricane, localized in a little community? Do you send a man in right away? Mr. DUNNE. When a request for a Governor comes to our regional office, we send a member of the Federal Disaster Assistance Admims- tration into the area and also members of other Federal agencies to look at the damage. Once it is declared, we ask the State where they would like us to set up the individual assistance centers where people can come and apply for assistance. We pretty much leave up to States where they would like the Federal Government to put these offices. Senator MONTOYA. What do you do with respect to disasters in areas that are strictly under the control of Indian tribal councils? How do you handle that? Mr. DUNNE. The Governor still must make the request for disaster assistance. We envision dealing with Indian tribal organizations directly because there may be prohibitions in some States against deal- ing with Indian citizens in the same way the State does with non- Indians. Senator MONTOYA. I am speaking now of an instance where a little community, Indian community of Canoncito in New Mexico had a cyclone hit it and the roofs of the homes were razed and considerable damage was done. Your agency was called upon by my office to try to do somethmg and furnish housing to these Indians and your agency provided trailers for these people. They are living in trailers now pending a new housing program in that community. I want to thank you and the people in your agency for affordmg these Indians the relief that you did. That is about all I have from this witness on this subject, Mr. Chairman. Thank you. Senator BURDICK. Senator Stafford? Senator STAFFORD. No questions, Mr. Chairman. PAGENO="0267" 261 Senator BURDICK. Senator Morgan? Senator MORGAN. Mr. Chairman, just two or three elementary questions. Mr. Dunne, I think you have to assume that I know very little about your agency. How many employees do you have in your agency? Mr. DUNNE. We have right now 136 permanent employees and some 70 to 80 temporary employees. Senator MORGAN. I am sorry. I didn't hear you. Mr. DUNNE. We have on board right now 136 permanent employees and we are authorized 161 which means there is a gap of 25. We currently have some 70 temporary employees under the authority of the act who are helping to clean up paperwork from some of the past disasters. Senator MORGAN. Are they all located here in Washington? Mr. DUNNE. No. Approximately 60 percent of these people are in the regions, the Federal regional cities. Senator MORGAN. When you say in the regions, what regions are you talking about? Mr. DUNNE. The 10 regional cities, Boston, New York, Phila- delphia, Atlanta, Chicago, Dallas, Kansas City, Denver, San Francisco and Seattle. Senator MORGAN. You say, I believe in your statement, that the basis for your authority is the 1974 Act and that is the successor to the 1970 Act. When was your agency or when was the program first begun to be administered by HUD? Mr. DUNNE. July 1, 1973. Senator MORGAN. Where was it before then? Mr. DUNNE. In the Office of Emergency Preparedness in the Ex- ecutive Office of the President. Senator MORGAN. That is a program that has evolved over the last 15 or 20 years? Mr. DUNNE. Almost 25 years, Senator. Senator MORGAN. Do you have any other responsibilities other than the disaster relief? Mr. DUNNE: No. This is a full-time responsibility of the agency and the only responsibility. Senator MORGAN. No further questions. Senator BURDICK. Senator Hart? Senator HART. I have no questions. Senator BURDICK. I have a rather detailed question here on title V. Maybe you could just give me a general response. What have you done in the area of title V? Mr. DUNNE. Title V, meaning- Senator MORGAN. I am sorry, Mr. Chairman, I can't hear. Mr. DUNNE. There have been no funds requested for this particular title of the act. As the Public Works staff knows from previous dis- cussions, we have had problems with this particular section. Just as a matter of historical insight, a task force was convened, chaired by Assistant Secretary Meeker, acting on behalf *~ Secretary Lynn, which worked with a number of agencies on this particular title, but just as importantly, on the whole issue of long-range re- covery and what it means. One of the problems that that task force ran into was the meaning of economic dislocation, which is used in the title. I don't mean to be PAGENO="0268" 262 trite, but I think that people have very fuzzy ideas about what the intent of Congress was. - One of the problems was the way that economic dislocation was described in the legislative history. The task force thought it meant that economic dislocation must be so severe that the employment base was destroyed. One of the problems is that there is no factual evidence to support this contention. We find, for instance, in the unemployment com- pensation portion of the disaster relief program, that unemployment compensation payments generally taper off in from 6 to 8 weeks as an average. As an interim measure, the administration has proposed two basic programs that can help in this area. One is the Community Develop- ment Act of 1974, which provides the Secretary of HTJD with a discretionary fund. Part of that discretionary fund, up to 25 percent, can be used for emergency needs following major disasters. Also, I have been advised that the Economic Development Admin- istration, under title IX of its Act, has the authority to utilize some of its money for these particular types of problems. I think the real problem that we have run into is that we cannot identify specifically what types of problems are to be addressed. There is no evidence we can see that supports the contention that industry leaves a particular community because of a natural disaster, unless it was going to leave anyway because the industry or the business in question wasn't doing well in that particular area. We don't see any evidence that long-term unemployment exists because of the disaster. There may be long term persistent unem- ployment because of general economic conditions, but they are not necessarily caused by a disaster. When we take a look at what the Federal Government's policy is going to be in addressing these problems, we have always worked under the theory that disaster relief legislation was designed to try and restore a community to its predisaster level. We think with the authorities contained in Public Law 93-288 and other independent authorities such as those of SBA, the Federal Highway Administration, and so forth, that those conditions are pretty well met, and that communities over a short period of time are restored to the point where they were before the disaster occurred. One of the things which I have discussed with Assistant Secretary Meeker and other interested parties is going out and taking a look at some of these communities that have had disasters after enough time has passed, to see what economic problems really exist because of the disaster as compared with the economic condition of that community before the disaster. We have no evidence right now that leads us to believe that there are really long-term economic develop- ment problems, that industry leaves or incomes are substantially cut, or that high persistent unemployment is going to exist because of a disaster. Senator BURDtCK. Do you apply this to the town of Zerna? Mr. DTJNNE. Yes, sir. Senator BIIRDICK. It is coming along pretty well? Mr. DUNNE. Yes. Of course, Zenia had one large industry of I think, about 125 or 130 employees. That company decided to stay PAGENO="0269" 263 in Zenia, but because of some zoning change that was initiated by the city fathers, it didn't start reconstruction immediately. While construction didn't begin as fast as it could have, I don't know of any evidence that leads me to believe that at this point that there is going to be massive unemployment or that there is going to be a substantial movement of business outside of the Zenia area. As a matter of fact, the unemployment compensation benefits allowed under law have pretty much tapered off and were substantially reduced in a relatively short period of time after the Zenia incident. Senator D0MENIcI. Would the chairman yield? Senator BURDICK. Yes. Senator DOMENICI. You used the word fuzzy about that section. I dreamed it up but I assume you had no personal intention to relate it to my thinking. Is that coirect? Mr. DUNNE. That is correct. Senator D0MENIcI. Let me ask you: When we came up with this recovery program it was a result of the Pennsylvania hearings where we had 10 or 12 local jurisdictions all contiguous but all dealing as in- dividual entities in an effort to tap the resources of the Federal Government-everything from SBA to Agriculture to the President's discretionary funds-for rebuilding purposes. They found there was no mechanism to coordinate the redevelop- ment efforts. The localities weren't talking about some special eco- nomic development thrust to put them back better than they were before, but rather, if there could be some way to get all of these indi- vidual entities together and prepare a plan for reconstruction and re- development, that perhaps some kind of pooled effort would be better than the fragmentary effort they had and which still persists, as I understand it. Your problem is you cannot define the kind of assistance which ought to be given through this mechanism if you relate the need totally to putting them back to where they were before the disaster. Mr. DUNNE. That is the first problem, yes. That is the main problem. Before you can identify organizationally how it is going to be implemented, I think you have to determine what the issue is, what problems exist in the community because of the disaster, and what type of programs should go in and fill the gap if, indeed, there is a gap. Senator D0MENIcI. Then I put the question to you: If we run into another disaster that is as broad based as Agnes was in Pennsylvania, how are we going to cope with the individual jurisdictions which are contiguous and have interrelated problems? In some instances a road connects the two and one applies and one doesn't, or the road ought not to be there but ought to be somewhere else, but three jurisdictions have to agree on relocating it? If in fact this won't work as an economic development effort, how are we going to solve those interjurisdictional problems so as to cause the flow of help to move more rapidly and effectively? Mr. DUNNE. First, I think what we have to see if we are going to use a road as an example, is that if the road was destroyed, Public Law 93-288 is going to repair or restore it. Senator D0MENIcI. I understand that. Mr. DUNNE. Second, if the road is there and it wasn't destroyed, then why has the Federal Government got to put in a new road? PAGENO="0270" 264 The road wasn't mislocated because of the disaster. That is where we start getting into the fuzzy area. Senator D0MENIcI. I understand that. I don't want to belabor the point. But you can take the road situation-it was destroyed and good planning would indicate it ought not to be put back where it is, but it is subject to the jurisdiction of three different entities in deter- mining where it ought to be. The thrust behind this program was that there would be a coordinated group of local officials that would take a look and say we have had all of the public hearings and under the law we can build a new road, but we are not going to build it where it was. How are we going to solve that kind of coordination problem? That is only one example. There are many. We saw bridges that shouldn't be replaced as before, but there would be an interjurisdic- tional argument as to whether it should be replaced where it was or not. Mr. DUNNE. Somebody owns that bridge. Under our law, if they don't want to replace the bridge, they can take 90 percent of the funds which could be used for that purpose and do whatever they want. Whoever holds title to that bridge will have to be the one that makes that decision. Senator D0MENICI. I understand that but you can't build half a bridge or half a road. If there is a squabble, one wants their money and one wants out to do something else with it under that law and one thinks they need the road- Mr. DUNNE. Whoever holds title to that bridge is going to have to make that decision. To my knowledge, we have never run into joint ownership of a public facility. Some municipal or county or State entity owns a particular physical property and must make the decision. Senator D0MENIcI. I have no further questions. Senator BTJRDICK. Could I ask one more question and then there will be a series of questions we will submit in writing. You said that section 408 would have to wait a year or two to see how things work out. Most States are having their legislative sessions right now in the off year. Suppose we find that a great many of these States do not come up with the budget to provide the matching funds. What do we do then? Mr. DUNNE. We are dealing with a hypothetical situation. I would have to wait to comment until I see the actual situation. We have had the Council of State Governments working with us on State disaster legislation for a number of years. They are working with the 48 out of the 50 States that are going to have legislative sessions, on section 408, and other pertinent sections as they relate to the States' efforts once a disaster is declared. Until these legislative sessions run out, I'll withhold judgment. We do believe that, if we get down to a confrontation in this area, we could withhold other Federal funds if the State blatantly refuses to repay the Federal Government after promising to do so. We won't initiate these actions, until circumstances require us to. Senator BURDICK. Thank you very much. Senator MORGAN. Mr. Chairman, could I make one request? Mr. Dunne, in an effort to sort of help me get acclimated to all of PAGENO="0271" 265 this information, I wonder if you would have someone on your staff prepare for me a diagram and a chart of the line of authority and not only from the Secretary of HUD down to you, but to your regional offices and maybe just one brief illustration of the type of relief you have given in each district. It would help me to understand all that has been presented to us. Mr. DUNNE. We would be happy to, Senator. [Mr. Dunne's prepared statement, responses to Senator Burdick's written questions, and the material relative to the regulations pre- viously requested by Senator Domenici follow:] PAGENO="0272" 266 STATEMENT OF THOMAS P. DUNNE ADMINISTRATOR FEDERAL DISASTER ASSISTANCE ADMINISTRATION DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT before the CONMITTEE ON PUBLIC WORKS UNITED STATES SENATE March 4, 1975 Mr. Chairman and Members of the Committee: I am pleased to have the opportunity to appear before this distinguished Committee today to discuss the fiscal year 1976 budget request for the President's Disaster Relief Fund. For the purpose of establishing a background against which funding requests may be discussed, I would like to present a brief review of the authorities under which the Federal disaster assistance program operates, with particular attention to those for which the Federal Disaster Assistance Administration is responsible. I will then touch on FDAA's operations and discuss the FY 1976 request more specifically. The basic authority for the Federal government's disaster relief program is the Disaster Relief Act of 1974, Public Law 93-288, which this Committee played a major role in developing. This law is the successor to the Disaster Relief Act of 1970, Public Law 91-606, which remains in effect with respect to any major disaster declared before April 1, 1974. The current Act is the product of over twenty years of evolutionary Federal involvement in providing assistance to supplement the efforts and available resources of States and local governments which have PAGENO="0273" 267 suffered major natural disasters. It continues the evolutionary process by expanding the range of authorized assistance and by providing for increased flexibility in the administration of certain types of grants. The authorities contained in the Act are vested primarily in the President. Most of these authorities have been delegated to the Secretary of Housing and Urban Development who has, in turn, redelegated many of his authorities to the Administrator of FDAA. Under the Act, FDAA is responsible for assessing potential major disaster or emergency situations, and for supporting the Secretary's recommendation to the President on whether a major disaster or emergency should be declared. After a declaration, FDAA is responsible for the administration of assistance programs authorized by P.L. 93-288 for which the Agency holds delegated authority. FDAA is also responsible for coordinating the efforts of all Federal agencies operating in the designated disaster area, whether these agencies are operating under their own emergency authorities or under a mission assignment. Funds to support the grant activities administered by FDAA are appropriated to the President. The authority to administer the President's Disaster Relief Fund has been delegated to FDAA. The authorization for the fund is indefinite, and the appropriation has traditionally been made on a "no-year" basis. The appropriation language contains a three percent limitation out of which FDAA finances its operating costs. With a few exceptions, FDAA's authority to tap the disaster relief fund for program purposes lies in the President's determination that an emergency or a major disaster has occurred. These exceptions are contained in Title II of the Act, which deals with disaster preparedness assistance, and in 50-194 0 - 75 - 18 PAGENO="0274" 268 sections 415 and 417 of the Act dealing with emergency communications and fire suppression grants, respectively. A Federal-State agreement, signed by the Governor and the Regional Director, is the basic document under which noney is provided from the disaster relief fund. Funds nay be transferred directly to States and local governments upon the subnission and approval of project applications for damaged or destroyed facilities. States may receive direct Federal funding for individual and family grants under section 408 of the Act. Assistance is also made available through other Federal agencies operating under assignments from FDAA. Our data indicates that, for disasters declared during the past two fiscal years, approximately 79 per cent of all monies obligated from the disaster relief fund have been provided directly to States and local governments. Of this 79 per cent, 43 per cent was obligated for repair or replacement of roads, streets and bridges, 10 per cent for repair or replacement of damaged public utilities, and 7 per cent for debris removal. The remaining 19 per cent was obligated primarily for water control facilities, public buildings, and private, non-profit facilities. All obligations for the section 408 programs have occurred in the current fiscal year, and now amount to $16.7 million. Of the 21 per cent of disaster relief fund obligations for services provided through other Federal agencies, 7 per cent was provided through the Department of Labor for disaster unemployment compensation, 7 per cent through the Corps of Engineers, primarily for debris clearance, and 6 per cent through the HIJD Regions for temporary housing. The remaining PAGENO="0275" 269 1 per cent was spread over a large number of other agencies that provided more limited assistance in specific instances. I wish to note that our appropriation request is by no means the only source of Federal funds for disaster assistance. Other agencies, including the Federal Highway Administration, the Small Business Administration, and the Department of Agriculture have their own authorities and funds which nay be brought to bear in disaster situations. In fact, FDAA data indicates that, for fiscal year 1974 declarations, the President's fund will provide about 42 percent of the total funds expended by the Federal government. An examination of the cost of declarations to the disaster relief fund over the recent past indicates a rising trend. The average cost per declaration for those disasters declared in calendar year 1968, when Public Law 81-875 was in effect, was $745,000. In calendar year 1972, under Public Law 91-606, the average was $12,900,000, reflecting the magnitude of costs generated by Tropical Storm Agnes. For last year, which may be considered more "normal" in terms of the severity of the disasters which were declared, the average cost per declaration is estimated to be $3,700,000. These increases reflect a number of factors including generally higher costs, a greater concentration of property, and a broadening of the assistance authorized in disaster relief legislation to take the needs of the individual victim more into account. An examination of the appropriations history of this program in another light clearly illustrates the difficulty in attempting to predict future PAGENO="0276" 270 requirements for funds. The record shows that there have been twenty supplemental and budget amendment requests which were generated by unforeseen events. Each of these requests has been treated with dispatch and understanding by the Congress. Our ability to predict nature's course of action has not improved substantially as we present the FY 1976 budget request of $150 million for consideration. At the time the budget formulation process was started, FDAA had no experience upon which to judge the effect of the new Act on fund requirements and, in several respects, that experience is still lacking. We find, for example, that applicants have been slow to avail themselves of the flexible funding provisions of section 402(f) of the Act, and FDAA has not yet received the first formal application for a community disaster loam under section 414. In developing the FY 76 request, FDAA worked primarily with historical data indicating that disaster declarations during fiscal years 1972-1974 generated average funding requirements of approximately $190 million per year. This average, when combined with a projected carryover of $40 millioii from FY 1975, results in a request for $150 million. If our estimates of requirements for the coming year are too high, the budget authority will be carried forward and reduce the next year's request. If they are too low, we will return with such additional requests as are necessary to provide the assistance authorized by law. PAGENO="0277" 271 DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT FEDERAL DISASTER ASSISTANCE ADMINISTRATION WASHINGTON, D.C. 20410 March 31, 1975 Honorable Quentin N. Burdick Chairman, Subcommittee on Disaster Relief Committee on Public Works United States Senate Washington, D. C. 20510 Dear Senator Burdick: This responds to your letter of March 13, 1975, requesting answers to five questions to be included in the record of the hearings of March 4. Enclosed please find the responses of the Federal Disaster Assistance Administration to questions one through four. As I indicated during the hearings, an inter-departmental task force, under the chairmanship of Assistant Secretary Meeker, was established on the subject of Title V of the Disaster Relief Act of 1974. In view of this group's concern, I am forwarding your letter to Mr. Meeker for a reply to your fifth question. I appreciate having had the opportunity to discuss FDAA's programs and operations with you, and I look forward to a continuing close relationship with the Subcommittee on Disaster Relief. Sincerely, Thomas P. Dunne Administrator Enclosures PAGENO="0278" 272 Q. Could you provide some figures on expenditures under Section 404 of Public Law 93-288? How much of this figure represents site preparation? How much for mortgage and rental assistance? For the mimi-repair program? A. As of January 31, 1975, the latest month for which complete data is available, obligations under section 404 for those disasters declared since April 1, 1974 were $14.1 million, of which site preparation accounted for $2.5 million, mini-repair for $438 thousand, and mortgage and rental assistance for $8 thousand. PAGENO="0279" 273 Q. Could you relate disaster unemployment expenditures under the new law to those under PL 91-606? Have unemployment expenditures increased significantly? A. It is difficult to arrive at meaningful correlations because of the wide potential for variation in the types and severity of disasters from year to year, in the number of individuals affected, and in the State regulations in this area. The table below presents actual data from fiscal years 1973 and 1974, and experience through the first half of fiscal year 1975 (dollars in thousands): Number of Benefit Payments Fiscal Year Declarations and Administration 1973 53 $19,641 1974 49 5,895 1975 (one-half year).... 13 4,358 With respect to the length of time disaster unemployment compensation is provided, comparative data indicates that the number of compensable weeks per recipient has declined under the current law (based on random samples of disasters declared under P.L. 91-606 and under P.L. 93-288, as indicated): Compensable Average Weeks Recipients Duration Public Law 91-606 Sample 503,093 68,640 7.33 Public Law 93-288 Sample 79,879 13,527 5.91 PAGENO="0280" 274 Q. Your Fiscal 1976 budget estimates total your program costs at $284,557,000. This figure was then reduced by $100 million in "change in selected resources" to reach a net obligation estimate of $184,557,000. Could you explain what a "change in selected resources" is and why it is used here? A. Public Law 84-863 [31 USC 24 (b)] requires that, "The requests of the departments and establishments for appropriations shall. ..be developed from cost-based budgets." The "change in selected resources" entry constitutes a bridge between the presentation of financial data on a cost basis and the presentation of this data on an obligation basis. The "change in selected resources" entry in the FY 1976 column indicates that, while estimated obligations (on goods and services ordered, and grants made) will be $184,557,000, the liability of the appropriation to disburse upon demand will have increased by an estimated $100,000,000 as the result of performance under grants and contracts for which obligations have already been made, thus bringing the cost of the program for the year to $284,557,000. PAGENO="0281" 275 Q. Then, from the net obligation balance, you subtract $39,557,000 in unobligated balance and add $5 million for the year's end unobligated balance to arrive at a $150 million figure for appropriations. Yet, your unobligated balances for the previous years were quite a bit higher--over $39 million at the end of FY 1975 and an even greater figure at the end of FY 1974. Why did you add only $5 million this year? Might not this figure be low in view of previous years' experience? A. As the program and financing schedule shows, for a "no-year" appropriation such as the disaster relief fund, the obligations for a given year are "financed" from both "carryover funds" that were unobligated from prior years' appropriations, and by appropriations for the current year. The level of unobligated balances at the end of a given year represents funds which were anticipated to be obligated prior to June 30, but which were not. The projection of large unobligated balances for FY 1976 would have resulted in an apprcipriation request that was correspondingly larger. For example, a projected unobligated balance of $40 million at the end of FY 1976 would have resulted in an appropriation request of $185,000,000. While this amount corresponds closely with the projected level of obligations for FY 76, the $40 million would be excess to projected Agency requirements by virtue of the anticipated availability of $39,557,000 which will be "carried over" from FY 1975. The estimate of a $5 million unobligated balance at the end of FY 1976 is a reflection of the Agency's intention to maintain a' "minimum balance" available in the President's Fund at all times. PAGENO="0282" 276 ~ull~ ond ~guillott~on~ 39 ~if~/~161 CHAPTER XIII-FEDERAL DISASTER AS- SISTANCE ADMINISTRATION, DEPART- MENT OF HOUSING AND URBAN DE- VELOPMENT Inoeket Re. R.-74-299J PART 2205-FEDERAL DISASTER ASSISTANCE ADMINISTRATION Interim Regulations Certain authorities and responsibili- ties of the President under the Dhaster Relief Act of 1974, Public Law 93-288 (hereinafter referred to as the "Act") are assigned to the Secretary of Hous- ing and Urban Development by Executive Order 11795, dated July 11, 1974, and fur- ther delegated by the Secretary to the Administrator of Federal Disaster As- sistance on August 5, 1974. Regulations implementing most of those authorities and responsibIlities were published In the FEDESAL REGISTER of August 5, 1974,' as TItle 24 of the Cede of Federal Regula- tIons, §8 2205.1-2205.74. Regulations con- cerning section 201 of the Act, Federal and State Disaster Preparedness Pro- grams, are issued herewith. Because of time limitations imposed by the Act for financial assistance to the States under section 201(c), these new regulations must be operative as soon as possible. Notice and public procedure are impractical and contrary to the public interest. However, interested parties and government agencies are encouraged to submit written comments, views or data regarding these interim regulations promulgated hereby to the Administra- tor, Federal Disaster Assistance Admin- istration, Department of Housing and Urban Development, Washington, D.C. 20410. All such submissions received on or before January 13, 1975 will be con- sidered prior to the promulgation of the final SDAA regulations, Inasmuch as these amendments bring the Federal Disaster Assistance Program into com- pliance with current statutory law and confer a benefit on the public, good cause exists for making them effective upon publication in the FEDERAL REGISTER. Pursuant to the authority contained in section 7(d) of the Department of Housing and Urban Development Act (79 Stat. 670,42 U.S.C. section 3535(d)), new Subpart G is added to Part 2205 of TItle 24 of the Code of Federal Regula- tions, as follows: Subpart C-Disaster Preparedness Assistanee Sea 2101.75 General. 2205.76 DeSaitloiss. 2205.71 Federal Disaster Preparedness Pro- graxa 2105.78 Teehnlesl aesistosnee. 2205.70 FInancial assistance. Ass'rtaoerry: See. 7(d), Department or Housing and U,'bsn Development Aet 170 Stat. 870, 42 U.S.C. 3535(d)), Subpart G-Disaster Preparedness Assistance § 2205,75 General. (a) The purpose cal this subpart is to prescribe the standards and procedures to be fofitowesi in Implementing Public Lesi 83-283 TItle fl-Disaster Prepared- ness Assistance, sectiori 201, Federal and (3) Determining requirements and ar- State Disaster Preparedness Programs, ranging for training of Federal and State (b) The disaster preparedness pro- personnel, and conducting exercises, cri- gram shall be carried out in accordance tiques, and evaluations to enhance dis- with the policies set forth in I 2205.3 and aster preparedness programs. the following priorities: (4) Sponsoring and monitoring dis- (1) To prepare for the efficient and aster-related research and the applica- expeditious provision of disaster relief. tion of science and technology to Fed- (2) To mitigate potential disaster ef- eral, State, and local disaster prepared- fects on persons and property through ness plans and programs. warning, evacuation, and emergency pro- (b) The Regional Director shall estab- tective measures. llsh a regional program of disaster pre- (3) To reduce the effects of hazards psredneas that is consistent with the through effective land use and construe- overall national program and with the tion practices, thereby eliminating or State programs within his region snd lessening disoster-producing events, shall manage that regionsl program by: § 2205,76 Definitions. (1) Reviewing Federal agency, State, As used in this part: sponse activities and recommcnding im- (a) `Disaster preparedness plans" provements. means those plans prepared by Federal, (2) Assisting the States in accordance State, and local governments in advance with the Act and these regulations. of anticipated disasters for the purpose 13) Coordinating the disaster prepar- of assuring effective management and edness programs og Federal agencies delivery of aid to disaster victims, and within his region. providing for disaster mitigation, waits- (4) Preparing plans and conductIng tag, rehabilitation, and short- and long- training, exercises, critiques, and evalus- term recovery, tions to enhonce coordinated Federol and (b) "State emgrgcncy plan," as usen State disaster preparedness and response. in section 301(b) of the Act, means that - - , State plan which is designed specifIcally § 220s. ~8 Trvlseurs ants seer. for State-level response to emergencies (a) T'ne Regional Director shall, upon or major disastem, and which sets forth request, provide technical assistance to the actions to be taken by the State and the States, in accordance with the pri- local governments, including those for orities specified in 1 2205.75(b) of these implementing Federal disaster assist- regulations, for comprehensive plans and ance. practical programs for preparation (c) "Stats plan" means a work plan, against disasters, including hazard re- submitted in application for a develop- duction, avoidance, and mitigation; for mont grant, for achieving the objectives assistance to individuals, businesses, and set forth in that section of the Act. State and local governments follosving (d) "Financial assistance" means such disasters; and for recovery of dam- grants from the President's Disaster Re- aged or destroyed public and private fa- lief Fund under authority of section 201 gilities and economic recovery, of the Act. (b) Particular emphasis shall be given to) "State disaster preparedness go- to technical assistance in the following ordinatsr" means the Governor's desig- aspects of disaster preparedness; nee for overall disaster preparedness (5) The drafting of disaster related program coordination or management State legislation and executive authori- responsibility, ties. (f) "Technical assistance" means pro- (2) Vulnerability analyses. vision Of guidance through advice and (3) Work ptans and other documents- consultations, workshops and confer- tion for disaster preparedness grants. ences, studies and analyses, reports and (4) State and local disaster prepared- instructional materials, and other ness programs and procedures. services. (5) Staff training, workshops, and (g) "Vulnerability analysis" means a seminars. systematic investigation of potential dis- (6) Disaster assistance exercises. asters in terms of probability, frequency, (7) Program evaluation. magnitude, and location, in order to fore- (8) Public information and education cast their probable effects, in specific geo- programs. graphical areas, on the people, systems, (9) Application of technological infor- facilities, resources, and institutions. mation to the disaster preparedness pro- § 22o~; ~ Disaster Preparedness Ic) The Regional Director shall also advise the States regarding cotnplemen- (a) The Administrator is authonzed tary Federal programs that will enhance to establish a progmm 0f disaster pre- State and local disaster assistance and paredness that utilizes the services of all preparedness. appropriate agencies and to provide over- (d) Requests for Federal technical as- lint nagm nt fthtprograrnby __ ~ist~ unde setlos 201(b) of the eral agencies and conducting program ~ d ~ ~ t Oh Re reviews of Federal activities relating ~ D ~ disaster preparedness. (2) Directing the preparation and ye- (1) The reel-test for technical asoistance view of Federal disaster preparedness shall indicate as specifically as possible plans. the objectives, nature, and duration of REPRINTED FROM THE FEDERAL REGISTER PAGENO="0283" the requested assistance; the recipient (1) A `State emergency plan" for un- agency or organization within the State; plementation as required by sectIon 301 the State official responsible Ic: utilizing (b) of the Act shall be developed. such assistance; the manner in which (2) The State shall take Into account such assistance is to be utilized; and the kinds of disasters to which it is most any other information needed for a full vulnerable and the particular require- understanding of the need for such re- monte therefrom for disaster response quested assistance. and mitigation. (2) The State shall provide assurance (3) State guidance and assistance that technical assistance does not clupli- shall be provided to local jurisdictions In cate any existing State capability, any the development of their short- and State or local effort funded by the Fed- long-term disaster preparedness plans, eral Government, or any Federal assist- programs, and capabilities. anne provided under other authority. (4) The State plan shall indicate the Ce) Nothing In these regulations shall environmental factors that were taken be construed to prevent the States from into account in fornsulatmg the plan. In obtaining appropriate technical assist- addition, the State plan shall establish anca from other sourges, including other substantive criteria and methods for the Federal agencies under such agencies' assessment of the environmental impact own statutory or delegated authorities, of State disaster assistance. 2 5 F' ` ` Ce) The development grant may ap- maccia ess~o~anee. ply to such preparedness programs and (a) The Regional Director may pro- capabilities as; side the following financial assistance to (1) PlannIng for short- and long-term the States, In accordance with the priori- disaster response in general, for apecific ties specified irs § 2205,75(b) of these reg- disaster contingencies In special locales, ulatlons, upon written request by the for local and area mutual emergency sup- Governor or his authorized representa- port under State sponsorship, and for tive: disaster mitigation and hazard reduction, (1) .An initial development grant, not to exceed In the aggregate $250,000, for (2) Revision, as necessary, of State the development of plans, programs, and legislation, Implementating orders, capabilities for disaster preparedness regulations, and other authorities and and prevention, provided that such grant assignments relevant to disaster pre- is applied for by May 22, 1975. paredness and assistance. (2) An annual Improvement grant of (3) Disaster-related mutual aid corn- up to $25,000 but not to exceed 50 per pacts and agreements. cent of the cost of improving, maintain- (4) Conduct of vulnerability analyses tag, and updating State disaster assist- not otherwise available but necessary for ance plans. the development of State and local (b) Any financtal assistance provided disaster preparedness plans and pro- under Public Law 91-19 or Public Law grams. 91-606 for these purposes shall not pre- (5) Design of disaster-related emer- elude assistance in the'~'ull a-. mint an- gency systems. thoqized by Public Law 93-2a. for fur- `(6) Training and exercises. ther development of disaster prepared- (7) Program reviews and postdisaster ness plans, Programs, and capabilities, critiques. (c) Application for a development (8) Public information and education grant shall include a State work plan programs. that; (f) Federal funds provided to the (1) Sete forth a comprehensive and State, or through the State to local coy- detailed program of work to develop ade- ernment, under the provisions of section cpsate capability for preparation for 201 of this Act may not be used to pro- short- and long-term asetetance follow- cure or repair equipment, materials, or inc emergencies and major disasters, In- facilities except that required for ad- eluding provisions for assistance to In- ministration of the grant. dlvlduals, businesses, and local govern- (g) The Regional Director may accept ments. a letter from the Governor requesting (2) Indicates the designated State grant assistance as meeting the applica- agency or agencies that will be involved tion time limit prescribed by the Act for In the development effort and the State a development grant. disaster preparedness coordinator ap- (h) Work under a development grant pointed by the Governor. shall be scheduled so that the entire ef- (3) Provides for appointment and fort specified can be completed within training of appropriate staffs, formula- three years of approval of the formal sp- tion of necessary regulations and pro- piication, unless special exception Is ap- cedures, and conduct 0f required exer- proved by the Adznirsistratar. cues. (i) Application for an improvement (4) DescrIbes the relationship of the grant shall include: proposed work with other disaster-re- (1) The designated agency or agen- lated plans, programs, and capabilities cies that will be involved in the Improve- under development. ment effort. (d) The following minimum require- (2) A work plan setting forth those mente shall apply to financial assistance elements of the comprehensive and de- under section 201 of the Act in the de- tailed program that are to be improved velopment of the comprehensive and de- under this grant and any additional or tailed State disaster preparedness pro- subordinate plans to be developed for gram: specific contingencies or disaster func- 277 40162 lions in accordance with the State's disaster preparedness program. 0) A grant appllcation may be amended at any time prior to the sched- uled completion of work under tise grant if warranted on the basis of new require- ments, changes In Federal or State statutes or other legal authorities, or other sufficient reason, provided such proposed madifications are mutually agreed upon by the Governor or his au- thorized representative and by the Re- gional Director. (k) All grants under section 201 Of the Act are subject to the appropriate provisions 0f 0MB Circulars No. A-OS, Federal and Federally Assisted Programs and Projegte: Evaluation, Review and Coordination (revised November 13, 1973, and effective January 1, 1974), No. A-87, Principles for Determining Coats Applicable in Grants and Contracts with State and Local Governments (issued May 9, 1968, and amended June 19, 1970), and No. A-102, Uniform Admin- istrative Requirements for Grants-In- Aid to State and Local Governments (re- vised October 19, 1971). In accordance with these requirements the following provisions shall also apply: (11 Financial status and performance reports shall be made quarter.iyta the Regional Director. (2) At the request of the State and with the approval of the Regional Direc- tor, an advance of funds not to exceed the first 90 days' estimated operational expenses may be made. (3) (i) State audits shall be made to determine, as a minimum, the fiscal in- tegrity of financial transactions and re- ports, and the compliance with laws, regulations, and administrative require- ments. The State shall schedule such audits with reasonable frequency, usu- ally annually, butnot less frequenty than once every two years. considering the na- hire, size, and complexity of the activity. A final audit of the grant shall be con- ducted upon completion of all work pre- sented in the State application, including amendments thereto. (ill Federal audits shall be scheduled as deemed necessary. Effective date. These interim regula- tions shall be effective on November 14, 1974. Tseossas P. DUaNE, Admin(strator, Federal Disaster Assistance Administratisn. [FR Doo.74-20e51 FIled ll-l1-74;g:4) sml PAGENO="0284" 278 U. S. DEPARTMENT OF HOUS$NG AND URBAN DEVELOPMENT FEDERAL DISASTER ASSISTANCE ADMINISTRATION T1~A~ SE~ll ~b~L r3300.8 I 3 /3 /75 1. This Notice Transmits_the Following: Handbook 3300.8, Requirements and Guidelines for State Disaster Preparedness Grants, dated March 1975. 2. Explanation of Material Transmitted: This Handbook contains substantive instructions concern- ing application procedures and supplements Section 201 of the Disaster Relief Act of 1974 and Title 24, Code of Federal Regulations, Part 2205, Subpart G. It is not to be construed in any way as waiving or limiting any requirements of law expressed in the Regulations, in the Act, or elsewhere. PAGENO="0285" 279 .į~~ENT °k q~c~ II h 4. ~ liii I I liii ~ :,**UU.ll U*Ø IIth~II / ~°`~`~~13G ~ [ 3300.8 REQUIREMENTS AND GU~DELIIN.ES OR STATE D~SASTER PREPAREDNESS GRANTS MARCH 1975 A HU~ HA~~~OOft( FEDERAL DISASTER ASSISTANCE ADMINISTRATION U. S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT WASHINGTON, D. C. 20410 PAGENO="0286" 3300.8 1 This Handbook sets forth requirements, guidelines, and procedures for applying for State disaster preparedness grants and their management. The Handbook supplements the Disaster Relief Act of 1974 (Public Law 93-288) and Subpart G--Disaster Preparedness Assistance--of Part 2295 Federal Disaster Assistance Regulations as cited in the Federal Register. It also reflects standards for establishing consistency and uniformity in the administration of grants included in Office of Management and Budget Circular No. A-95 and General Services Administration Federal Management Circulars 74-4 and 74-7 as they relate to the application, acceptance, and use of Federal funds. This Handbook is not to be construed in any way as waiving or limitingany requirements of law expressed in the Regulations, in the Act, or elsewhere. Further guidance and technical assistance on State disaster preparedness are available from FDAA Regional Offices. 280 FOREWORD PAGENO="0287" 281 TABLE OF CONTENTS r 33O~8~ 1-1. Purpose SECTION 1. INTRODUCTION 1-2. Types of Financial Assistance 1-3. Steps for Application 1-4. The Application Package Par a graph CHAPTER 1. APPLICATION PROCEDURES AND STANDARDS FOR DISASTER PREPAREDNESS GRANTS 1-1 SECTION 2. APPLYING FOR DISASTER PREPAREDNESS ASSISTANCE 1-1 1-2 SECTION 3. THE APPLICATION PACKAGE 1-2 SECTION 4. COORDINATION AND REVIEW PROCEDURES 1-5. 0MB Circular A-95 Coordination Procedures 1-4 1-6. Statewide Planning 1-5 1-7. State Work Plan Review 1-5 SECTION 5. APPLICATION EVALUATION 1-5 1-6 1-6 SECTION 6. GRANT MANAGEMENT, REVIEW, AND EVALUATION 1-6 1-7 1-8 1-8. 1-9. 1-10. 1-11. 1-12. 1-13. Intent Application Evaluation Notice of Review Action Means of Coordination State Agency Review and Evaluation FDAA Review i PAGENO="0288" 1-8 1-8 1-8 1-9 1-9 1-9 1-10 1-10 1-11 1-1~1 1-12 2-1 2-1 2-1 2-2 2-3 2-3 2-3 2-3 2-3 2-3 2-4 2-4 282 ~300.8 Paragraph SECTION 7. MONITORING AND REPORTING 1-14. Purpose 1-15. Monitoring 1-16. Reports 1-17. Supplemental Reports 1-18. Changes and Amendments 1-19. Project Review SECTION 8. PROJECT COMPLETION AND APPROVAL 1-20. Evidence of Completion 1-10 1-21. Completion Letter 1-10 SECTION 9. GRANT CLOSEOUT AND TERMINATION PROCEDURES 1-22. Purpose 1-23. Definitions 1-24. Grant Closeout 1-25. Grant Suspension 1-26. Termination CHAPTER 2. FINANCIAL MANAGENI~NT OF GRANT FUNDS 2-1. Introduction 2-2. Basic Responsibilities 2-3. Standards for State Financial Management Systems 2-4. Advances of Funds 2-5. Cash Depositories 2-6. Interest Income 2-7. Grant Payments 2-8. Financial Status Reports 2-9. Final Audit 2-10. Retention of Project Records 2-11. Principles an& Standards 2-12. Required Forms ii HUO-Wa&~. 0. C. PAGENO="0289" 283 [ 3300.8 I APPENDIXES Paragrapj~ APPENDIX 1. APPLICATION PACKAGE A. Basic Application (Governor's letter requesting 1 Federal financial assistance--par. 1-4. No format included herein.) PART I - Application for Federal Disaster 2 Preparedness Assistance (sample form and ins truc tions) PART II - Annual Budget Information 4 (sample form and instructions) PART III - State Work Plan 6 PART IV - Assurances - 8 B. Supporting Attachments and Related Data (to be submitted by State) 1. Organizational Characteristics Statement 2. Clearinghouse (A-95) and other comments APPEhDIX 2. PRINCIPLES FOR DETERMINING COSTS APPLICABLE TO GRANTS TO STATE GOVERNMENTS 1. Objectives 9 2. Policy Guides 9 a. Administration 9 b. Funds 9 c. Management 9 3. Definitions 9 a. Approval 9 b. Cost Allocation 9 c. Cost 9 d. Cost Objective 10 e. Grant L0 iii 50-194 0 - 75 - 19 PAGENO="0290" [ 3300.8 284 Paragraph f. Grant Program g. Other State or Local Agencies h. Services 1. Supporting Services 4. Basic Guidelines a. Factors Affecting Allowability of Costs b. Allocable Costs c. Applicable Credits 5. Composition of Cost a. Total Cost b. Classification of Costs 6. Direct Costs a. Compensation of Employees b. Cost of Materials c. Equipment d. Other Items e. Services 7. Indirect Costs a. General b. State Departmental 8. Cost Incurred by Agencies Other than the Designated State Agency 9. Cost Allocation Plan a. General b. Requirements APPENDIX 3. STANDARDS FOR SELECTED ITEMS OF COST 1. Purpose and Applicability a. Objective b. Application 2. Allowable Costs a. Accounting b. Advertising c. Advisory Councils d. Audit Service e. Budgeting f. Communications g. Compensation for Personal Services 10 10 10 10 10 10 11 11 12 12 12 12 13 13 13 13 13 13 13 13 13 14 14 14 15 15 15 15 15 15 16 16 16 16 16 iv PAGENO="0291" 285 [~33O0.8 I h. Depreciation and Use Allowances 1. Employee Fringe Benefits j. Exhibits k. Materials and Supplies 1. Memberships, Subscriptions, and Professional Activities in. Motor Pools in. Payroll Preparation o. Personnel Administration p. Printing and Reproduction q. Procurement Service r. Training and Education s. Transportation t. Travel 17 19 19 19 19 20 20 20 20 20 21 21 21 3. Costs Allowable with FDAA Approval 21 a. Automatic Data Processing 21 b. Building Space and Related Facilities 21 c. Insurance and Indemnification 22 d. Management Studies 23 e. Preagreement Costs 23 f. Professional Services 23 4. Unallowable Costs 23 a. Bad Debts 23 b. Contingencies 23 c. Contributions and Donations 23 d. Entertainment 24 e. Fines and Penalties 24 f. Governor's Expenses 24 g. Interest and Other Financial Costs 24 h. Legislative Expenses 24 i. Underrecovery of Costs Under Grant 24 Agreements APPENDIX 4. PROCUREMENT STANDARDS 25 25 3. State Regulations 25 a. Standards of Conduct 25 b. Procurement Transactions 25 c. Procurement Procedural Requirements 26 d. Additional Requirements 28 1. General 2. State Responsibility Paragraph V PAGENO="0292" 286 3300.8 Par a g r a p h APPENDIX 5. MATCHING SHARE 1. Purpose 2. Definitions a. Project Costs b. Matching Share C. Cash Contributions d. In-kind Contributions 3. Conputation of Matching Share a. Project Costs b. Cash Contributed or Donated c. Services a~id Real or Personal Property 4. In-kind Contributions 5. Valuation of In-kind Contributions a. Volunteer Services b. Valuation of Materials c. Valuation of Donated Equipment, Buildings, and Land, or Use of Space d. Valuation of Other Charges 6. Supporting Records a. Volunteer Services b. Documentation 30 30 30 30 30 30 30 30 31 31 31 31 31 32 32 32 32 32 32 vi PAGENO="0293" [ 3300.8 SECTION 1. INTRODUCTION CHAPTERl. APPLICATION PROCEDURES AND STANDARDS FOR DISASTER PREPAREDNESS GRANTS 1-1. PURPOSE. This Chapter sets forth the requirements and procedures for a State requesting Federal finan- cial assistance for the development of State plans, programs, and capabilities for disaster preparedness under the provisions of the Disaster Relief Act of 1974, Public Law 93-288. Also included in this chap- ter are standards to ensure consistent implementation of the grant program for which the Federal Disaster Assistance Administration (FDAA) has overall respon- sibility. SECTION 2. APPLYING FOR DISASTER PREPAREDNESS ASSISTANCE 1-2. TYPES OF FINANCIAL ASSISTANCE. Upon written request by the Governor, the Regional Director may authorize provision of the following financial assistance to a State, in accordance with the priorities specified in disaster preparedness assistance regulations: a. Development grant. The State has until May 22, 1975, to apply for a dev~i.opment grant in an aggregate amount up to $250,000. A grant under this application may extend over a 36-month period, or longer if approved by the FDAA Admin- istrator. The State shall submit a single appli- cation setting forth the State's disaster pre- paredness program. b. Improvement grant. The State may apply annually for an improvement grant of up to $25,000 but not to exceed 50 percent of the cost of improving, maintaining, and updating State disaster assis- tance plans. NOTE: Request for change or amendments to an appli- cation may be submitted at any time during the life of a grant. Subsequent to May 22, 1975, budget adjust- ments for development grants may not exceed the pre- scribed limits set forth in the application. 287 Page 1-1 PAGENO="0294" [ 3300.8 288 1-3; STEPS FOR APPLICATION * a. Stibmit to the appropriate FDAA Regional Director a letter from the Governor requesting Federal financial assistance. b. Notify the appropriate designated clearinghouse of the intent to submit an application consistent with Office of Management and Budget (0MB) Circular A-95 (see paragraph 1-5). c. Submit a draft application (see Appendix 1) to the appropriate FDAA Regional Office. d. Hold confere~ice with FDAA officials to discuss the State draft application. The State disaster pre- paredness coordinator shall attend or be repre- sented at the conference. e. Following the conference with FDAA officials, submit the formal application with agreed-upon changes. SECTION 3. THE APPLICATION PACKAGE (See also Appendix 1) 1-4. THE APPLICATION PACKAGE. Applicants must use a stan- dard application package in applying for Federal financial assistance for disaster preparedness. That package includes: a. A letter from the Governor to the appropriate FDAA Regional Director requesting grant assis- tance. This shall indicate the designated State agency that will be involved in the development or improvement efforts and the State disaster preparedness coordinator designated by the Governor or by State law as responsible for overall coordination and management. This letter may be submitted separately from the application package and, for the development grant, will be considered as meeting the time limit for application pre- scribed by the Act, if such letter indicates the amount to be requested. The remaining elements * of the application package should be submitted as soon as practicable thereafter. (Should the Governor desire to use another form of State administrative structure for the development of the program, he may request a waiver of the "single" Page 1-2 PAGENO="0295" 289 [~ 3300.8 agency requirement in accordance with Section 204 of the Intergovernmental Cooperation Act of 1968. Such a request will be given expeditious handling by the Regional Director.) b. 4~~icatiOfl for Federal Disaster Assistance, HUD- 423 (see Appendix 1), which may be signed by the Governor's authorized representative. c. An annual g~ant budget, which shall be the basis for fiscal audit of the grant. d. A State Work Plan setting forth a comprehensive ~and detailed~ State disaster preparedness program for preparation against, and assistance following, emergencies and major disasters, including pro- vjsiOflS for assistance to individuals, businesses, and local governments. The State Work Plan is the major part of the application. It nay cover a maximum period of three years (unless a longer period is agreed to by the FDAA Administrator Ot his authorized representative). It should focus on major work elements to be undertaken and specific objectives to be achieved by the State. It should include all major disaster plans, pro- grams, and management objectives to be undertaken by the State. (See Appendix 1, Part III, for details.) e. Assurances of Compliance with the regulations, policies, guidelines, and requirements as they relate to the application, acceptance, and use of Federal funds for this assisted project. The State may be requested to provide additional information as deemed necessary by the FDAA Regional Director. (1) A brief statement of the State's organiza- tional characteristics, including provisions for appointment and training of appropriate staffs, formulation of necessary regulations and procedures, and conduct of required exercises to ensure that the plans, programs, f. ~~pporting attachmįp~) Page 1-3 PAGENO="0296" [ 3300.8 290 and capabilities to be developed can be imple- mented. This should include brief biographical sketches of the program director (State disaster preparedness coordinator) and other key personnel to be engaged in the project. (2) A copy of all A-95 comments (and any other review comments) received regarding the pro- posed State Work Plan. SECTION 4. COORDINATION AND REVIEW PROCEDURES 1-5. 0MB *CIRCULAR A-95 COORDINATION PROCEDURES a. General. In, accordance with FDAA procedures and 0MB Circular A-95 guidelines and procedures, the designated agency must notify the State clearing- house of the intent to submit an application for FDAA financial assistance for disaster prepared- ness. The purposes of the clearinghouse review are: (1) To identify the relationship of this project to other statewide or areawide disaster preparedness planning. (2) To identify the relationship of this project to the other planning and programming of particular State agencies and of local and regional planning bodies. b. Clearinghouse Agencies. There are three types of clearinghouses: (1) State Clearinghouse. A State agency, desig- nated by the Governor, with comprehensive planning capability. (2) Regional Clearinghouse. A nonmetropolitan areawide agency, designated by the Governor, with planning capability. (3) Metropolitan Clearinghouse. A metropolitan areawide agency, designated by the Office of Management and Budget pursuant to Section 204 of the Demonstration Cities and Metropolitan Development Act of 1966. Page 1-4 PAGENO="0297" 291 L~ 3300.8 1 c. Clearinghouse notification. The State's notifi- cation shall include a summary description of the work to be funded, including: (1) The identification of the designated agency. (2) A draft copy of the Work Plan. (3) The Federal program and agency (FDAA) under which assistance will be sought. (4) The estimated date by which time the Governor expects to file a formal application. d. Timing. The designated agency must notify the appropriate clearinghouse well in advance of the FDAA-State conference. In no instance will appli- cations be processed without prior fulfillment of the A-95 requirements. 1-6. STATEWIDE PLANNING. Where the designated State agency for purposes of the grant is not the designated clear- inghouse, the former shall notify the latter of its intent to apply to FDAA. 1-7. STATE WORK PLAN REVIEW. In addition to the A-95 re- view, the designated agency should submit a draft copy of th~ State Work Plan to other agencies likely to be required to implement portions of the plans and pro- grams or whose activities are likely to be substan- tially affected by the plans and programs, and to State, areawide, local, and Federal agencies and pri- vate organizations expected to contribute funds or services to the planning effort. SECTION 5. APPLICATION EVALUATION 1-8. INTENT. The intent of the evaluation procedure is to ensure a coordinated State approach, completeness of application, assistance in obtaining a grant--includ- ing the amount of financial and technical assistance required--and guarantee of high performance by the State. Page 1-5 PAGENO="0298" [~3OO.8 ~~1 292 1-9. APPLICATION EVALUATION. FDAA will review and evaluate the application to: a. Determine that a complete application package has been submitted to the FDAA Regional Director. b. Ensure that all requirements of this Handbook have been fulfilled and that the work to be performed under the proposed grant is eligible for disaster preparedness assistance. c. Identify_what the State intends to do (objectives and end products, including the cost of proposed work). d. Determine if the State has sufficient capability to perform the proposed work, including legal and financial authority, technical competence, fiscal and accounting controls, and other administrative support. 1-10. NOTICE OF REVIEW ACTION. After completion of the re- view and evaluation of the formal application, the Regional Director will notify the State in writing of his decision concerning approval of its application. In the event that the review cannot be completed with- in 45 days after receipt of the formal application, the Regional Director will inform the State by letter as to when the review will be completed. SECTION 6. GRANT MANAGEMENT, REVIEW, AND EVALUATION 1-11. MEANS OF COORDINATION. The following suggests pos- sible approaches to achieving State disaster program coordination: a. Common goals and ob~jectives. Insofar as it is feasible, comprehensive and functional planning agencies should adopt common goals and objectives. b. Common data and forecasts. To the greatest extent feasible, State departments should use common data, forecasts, and policies on growth and development, and data on vulnerability to specific disasters. Page 1-6 PAGENO="0299" 293 [ 3300.8 Also, locally assisted agencies in an areawide planning jurisdiction should use the same data, forecasts, and policies as the State. c. Coordination of work programs. The designated State agency should exchange information with other planning agencies to develop consistent and complementary work programs. d. Shared staff. When feasible, staffs and facili- ties of the State planning agencies should be shared. e. Subcontractipg. As appropriate, work should be subcontracted or delegated to other public plan- ning bodies for work in their areas of special competence. f. Technical assistance. States should provide technical assistance to localities and areawide planning organizations to help coordinate their plans and programs with statewide policy. Federal technical assistance will be provided to State and local governments upon request. 1-12. STATE AGENCY REVIEW AND EVALUATION. The State must review on a continuing basis the planning activities of its own agencies involved in the project as well as those of local governmentb participating under State sponsorship. The following specific items must be reviewed: a. The c~ua1ity of the planning work performed. b. The timeliness of the work performance. c. The recipient's coordination efforts. d. The recipient's compliance with Equal Opportunity Requirements. e. Overall financial management of the project. Page 1-7 PAGENO="0300" [3300.8 I 294 1-13. FDAA REVIEW. At lsast quarterly, the FDAA Regional Office will review the State's program performance. * Such a review will address: a. The quality of the planning work performed. b. The technical competence of the State ag~~įy staff and consultants. c. The adequacy of the State agency's procedures, fiscal and accounting controls, and other adminis- trative matters, and the ability of the State to maintain the schedule and content of the agreed- upon work program. SECTION 7. MONITORING AND REPORTING 1-14. PURPOSE. This section sets forth the procedures for monitoring and reporting program performance under development and improvement grants. These procedures are designed to place greater reliance on the State to manage the day-to-day operations of grant-supported activities. 1-15. MONITORING. The State shall constantly monitor the performance under grant-supported activities to assure that projected work units by time periods are being accomplished and other performance goals are being achieved. This review shall be made for each program, function, or activity specified in the approved grant application. 1-16. REPORTS. The State shall submit for each grant a quarterly performance report by the last day of the month following the calendar quarter for which the report is being submitted. The report shall briefly describe the following for each program, function, or activity involved: a. A co~parison of actual accomplishments to the goals established for the period. b. Reasons for slippa~ in those cases in which established goals were not met. c. Other pertinent information, including, when ap- propriate, analysis and explanation of cost over- runs or high unit costs. Page 1-8 PAGENO="0301" 295 r 3300.8 Financial Status Repį~~, (covered in Chapter 2) will be submitted along with the quarterly performance report. 1-17. SUPPLEMENTAL REPORTS. Between the required perform- ance reporting dates, events may occur that have significant impact upon the project or program. In such cases, the State shall inform the FDAA Regional Director as soon as any of the following types of conditions become known: a. Problems, delays, or adverse conditio~ that will materially affect the ability to attain program objectives, prevent the meeting of time schedules and goals, 9r preclude the attainment of project work units by established time periods. This disclosure shall be accompanied by a statement of remedial actions taken or contemplated and an indication of anyFederal technical assistance needed to resolve the situation. b. Favorable developments or events that will make it possible to meet time schedules and goals sooner than anticipated or at lower anticipated c. Minor changes in the scope of work, and minor adjustments of tasks within work items, with the reasons for the changes. 1-18. CHANGES AND AMENDMENT~. If any performance review conducted by the State or FDAA Regional Director discloses the need for major changes in the scope of work, objectives, or budget estimates, the State shall submit a request for change or amendment. 1-19. PROJECT REVIEW. The FDAA Regional Director or his designee will visit the State as frequently as practicable to: a. Review program accomplishm~qp~ and management control systems; b. Assist the Stai~q~ in determining technical assist- ance requirements. costs. Page 1-9 PAGENO="0302" J~3OO.8. I 296 SECTION 8. PROJECT COMPLETION AND APPROVAL 1-20. EVIDENCE OF COMPLETION. Upon submission by the State of the final product or supporting documentation that constitutes adequate and acceptable evidence of com- pletion of the required work, the Regional Director will undertake a Federal review to verify that all conditions of the grant have been met and that the work has been completed in a satisfactory manner. 1-21. COMPLETION LETTER. If all conditions of the grant have been met and the work has been completed in a sati-sfactory manner, the Regional Director will pre- pare a letter so advising the State and indicating that final grant payment will be made subsequent to review of State records. (A final audit will be scheduled.) SECTION 9. GRANT CLOSEOUT AND TERMINATION PROCEDURES 1-22. PURPOSE. This section prescribes uniform closeout and termination procedures for an FDAA grant to a State. 1-23. DEFINITIONs. The following definitions shall apply for the purpose of this section: a. rant closeout. The closeout of a grant is the process by which the FDAA Regional Director determines that all required work under the grant and all applicable administrative actions have been completed by the State. b. Date of completion. The date on which all work under a grant or any supplement or amendment there- to is completed and Federal assistance ends. c. Termination. The termination of a grant means the cancellation of Federal assistance, in whole or in part, under a grant at any time prior to the date of completion. d. ~~p~ension. The suspension of a grant is an action by FDAA that temporarily stops Federal Page 1-10 PAGENO="0303" 297 3300.8 assistance under the grant pending corrective action by the State or decision by *FDAA to termi- nate the grant. e. Disallowed costs. Disallowed costs are those charges that FDAA determines to be unallowable. 1-24. GRANT CLOSEOUT. The closeout procedure consists of the following: a. Upon request, FDAA will make prompt payments to a State for allowable reimbursable costs under the grant being closed out. b. The State shall immediately refund to FDAA any unencumbered balance of cash advanced to the State. c. FDAA will obtain from the State within 90 days after the date of completion of the grant all financial, performance, and other reports required as a condition of the grant. The FDAA Regional Director may grant an extension of time for the submission of reports when the State so requests. - d. After these reports are received and reviewed, FDAA will make a settlement for any upward or downward adjustments to the Federal share of costs. e. The State shall account for any property acquired with grant funds or received from the Federal Government. f. If a final audit has not been performed prior to the closeout of the grant, FDAA retains the right to recover an appropriate amount after fully considering the recommendations on disallowed costs resulting from the final audit. 1-25. GRANT SUSPENSION. If the State fails to comply with the stipulations, standards, or conditions of a grant, the FDAA Regional Director may, on reasonable notice to the State, suspend the grant and withhold further payments, or prohibit the State from incurring Page 1-11 PAGENO="0304" 298 3300.8 additional obligations of grant funds, pending cor- rective action by the State or a decision to terminate. The Regional Director nay allow all necessary and proper costs that the State could not reasonably avoid during the period of suspension, provided that they otherwise meet the provisions of this Handbook. 1-26. TERMINATION. Termination conditions for grants include the following: a. Termination for cause. The FDAA Regional Director may terminate any grant, in whole or in part, at any time before the date of completion, whenever it is determined that the State has failed to comply with `the conditions of the grant. The Regional Director will notify the State in writing of the reasons for the termination, together with the effective date. Payments made to a State or recoveries by FDAA under grants terminated for cause shall be in accord with the legal rights and liabilities of the parties. NOTE: The decision by the Regional Director to ter- minate a grant may be appealed to the Administrator, FDAA. b. Termination for convenience. The FDAA Regional Director or the State may terminate a grant, in ~c~le or in part, when both parties agree that the continuation of the project would not produce beneficial results commensurate with the further expenditure of funds. The two parties shall agree upon, the termination conditions, including the effective date, and in the case of partial termi- nations the portion to be terminated. The State shall not incur new obligations for the terminated portion after the effective date and shall cancel as many outstanding obligations as possible. The PDAA Regional Director will allow full credit to the State for the Federal share of the noncancel- lable obligations properly incurred by the State prior to termination. Page .1-12 PAGENO="0305" 1 3300.8 BASIC RESPONSIBILITIES CHAPTER.2. FINANCIAL MANAGEMENT OF GRANT FUNDS 2-1. INTRODUCTION. This Chapter prescribes the principles that must be followed by a grantee State under Title II of P.L. 93-288 (a) to account for the funds, costs,~ and activities authorized under a disaster prepared- ness grant, (b) to obtain the funds due the State under the grant, and (c) to prepare and transmit to the FDAA Regional Director the necessary financial statements. a. Primary Responsibility. The primary responsibi- lity for the establishment and maintenance of adequate procedur.es and internal financial controls governing the management and utilization of Federal funds rests with the State. b. Advice and Assistance. The State should look first within its own organization--to ~ublic financial officers or to independent-public ac- countants--for advice and assistance in establish- ing the n.ecessary accounting and financial control systems based on the guidelines and requirements in this Chapter. If necessary, however, FDAA will upon request assist the State in establishing the necessary systems. 2-3. STANDARDS FOR STATE FINANCIAL MANAGEMENT SYSTEMS. This section prescribes standards for financial management systems of grant-supported activities of State governments. State financial management sys- tems shall provide for: a. Disclosure. Accurate, current, and complete dis- closure of the financial results of each program, in accordance with the reporting requirements established by this Handbook. - b. Records. Records that identify adequately the source and application of funds for grant- supported activities. These records shall contain information pertaining to grant awards and author- izations, obligations, unobligated balances, assets, liabilities, outlays, and income. Page 2-1 2-2. 299 50-194 0 - 75 - 20 PAGENO="0306" 33OO~8 300 c. Control. Effective control over, and account- ability for, all funds, property, and other assets. The State shall adequately safeguard all such as- sets and shall assure that they are used solely for authorized purposes. d. Comparison. Comparison of actual with budgeted amounts for each grant. e. Disbursements. Procedures to minimize the tine elapsing between transfer of funds from the U.S. Treasury and disbursement by the State. f. Cost Allocation. Procedures for determining the allowability and allocability of costs in accor- dance with the provisions of this Handbook. g. Documentation. Accounting records that are sup- ported by source documentation. h. Audit. Audits to be made by the State to deter- mine, at a minimum, the fiscal integrity of finan- cial transactions and reports and the compliance with laws, regulations, and administrative re- quirements. The State shall schedule such audits with reasonable frequency, usually annually, con- sidering the nature, size, and complexity of the activities. 1. Resolution. A systematic method to assure timely and appropriate resolution of audit findings and recommendations. j. Subgrantee Standards. State requirement that sub- grantees (recipients of grants that are passed through by the State) adopt the standards set forth in paragraph 2-3. 2-4. ADVANCES OF FUNDS. If the State requires an advance of funds in order to begin work, application should be made on HUD form 423.2 in triplicate (Figure 1). Ordi- narily, only one advance not to exceed the first 90 days of estimated operational expenses will be made to any one State. The State shall submit its request for an advance to the appropriate FDAA Regional Director. Page 2-2 PAGENO="0307" 2-6. 301 [ 3300.8 1 2-5. CASH DEPOSITORIES. An advance to a State must be depositedin a bank with FDIC insurance- coverage, and the balance exceeding the FDIC coverage must be col- laterally secure, as provided for in 12 U.S.C. 265. The use of minority banks is encouraged. INTEREST INCOME. In accordance with Section 203 of the Intergovernmental Cooperation Act of 1968 (Public Law 90-577), the State and any agency or instrumental- ity of the State shall not be held accountable for interest earned on grant-in-aid funds pending their disbursement for program purposes. 2-7. GRANT PAYMENTS. The State shall submit to the appro- priate FDAA Regional Director monthly billings for costs incurred, consisting of an itemized statement of costs on HUD form 162 (Figure 2), together with SF 1034 (Figure 3) reflecting the total reimbursement requested. (If monthly costs are less than $1,000, the State may submit billing on a quarterly basis.) 2-8. FINANCIAL STATUS REPORTS. When the State submits its quarterly performance reports to the appropriate FDAA Regional Director by the last day of the nonth following the calendar quarter for which the report is being submitted, it shall also submit a Financial Status Report on HUD form 423.3 (Figure 4). 2-9. FINAL AUDIT. A final audit u2 the grant will be con- ducted by FDAA within 90 days of the completion of all work prescribed in the State application, including amendments thereto. 2-10. RETENTION OF PROJECT RECORDS. All financial records, supporting documents, statistical records, and other records pertinent to a grant award shall be retained and shall be accessible to duly authorized represent- atives of HUD and the U.S. Comptroller General for the purpose of making audits, excerpts, and transcripts for a period of 3 years, with the following qualifi- cations: a. The records shall be retained beyond the 3-year period if audit findings have not been resolved. Page 2-3 PAGENO="0308" 3300.8 302 b. Records for nonexpendable property that was acquired with program funds shall be retained for three years after the final disposition of such property. c. The retention period for records relating to development and improvements grants shall start from the date of the submission of the final ex- penditure report for the grant concerned. 2-11. PRINCIPLES AND STANDARDS. Principles and standards applicable to State agencies responsible for grant management are contained in the appendixes listed below: a. Principles for Determining Costs Applicable to Grants to State Governments are contained in Appendix 2. b. Standards for Selected Items of Costs are con- tained in Appendix 3. c. Procurement Standards are contained in Appendix 4. d. Guidance concerning Matching Share is contained in Appendix 5. 2-12. ~Qj~iRED FORMS. The required forms referred to in this Chapter are displayed on the following pages. Administrator Date Federal Disaster Assistance Administration APPROVAL Page 2-4 PAGENO="0309" 303 [ 3300.8 REQUIRED FORMS Figure 1 - Request for Advance or Reimbursement (RUD 423.2) Figure 2 - Statement of Disbursements Covering Amount Claimed from the Federal Disaster Assistance Administration for State and Local Plans (HUD- 162) Figure 3 - Public Voucher for Purchases and Services - Other Than Personal (Standard Form 1034) Figure 4 - Financial Status Report (HUD 423.3) NOTE: The above forms should be submitted in an original and two copies. Page 2-5 PAGENO="0310" 304 3300.8 Figure 1 REQUEST FOR ADVANCE ~ ~., OR REIMBURSEMENT D~-,-, D~-~ . , I S. L~: C~btA~ p~g~ j. M~tId~~ ~R~t~: (2)DA~Vh (3)3U~Vh Page 2-6 PAGENO="0311" [ 3300.8 Item 1 - Enter the name of the Federal grantor agency and organizational element to which the request is submitted. Item 2- Enter the Federal front number or other denti fying number assigned by the Federal grantor agency. Item 3 - Indicate with an "X" whether the type of pay meet requested is: a. Anedvance. reimbursement, or both. b. Final or partial. Item 4 - Indicate witle an "X" whether the report is pee pared on a cash or accrued expenditure basis. All requests which are for avlcances only shall be prepared onacash Item 5- Enter the partial payment requesf number for this request. Item 6 - Enter the employer identification number as signed by the U. S. Interoal Revenue Service. Item 7 - This space is reserved for an account number or other identifying number which may be asvignrd by the Item 8- Enter the month, day, and year for the beginning and ending of the period covered in this request. II the request is for an advance or for both an advance and reim- bursement, show the period that the advance will cover, If tht request is for a reimbursement, show the period for which the reimbursement is requested. Item 9- Enter the name and complete mailing address, including ZIP Code for the grantee organizatiun. Item 10- Enter the name and complete mailing address, including ZIP Code of the payee if it is different than the trantee organization nhown in Item 9. PLEASE READ BEFORE COMPLETING ITEM 11-The purpose of the vertical Columns Ill throcgh 131 is to pro- vide space foe separate cost breakduwns when a large project has been planned and budgeted by program, func- tion, and activity. If additional culumns are needed, use as many additional forms as needed and mark "cuntvruatixe" on each form; however, the summary totals of all prcgrams. functions, or activities should be thuarin in the "total" Col- umn on the first page, Item 11 - COMPUTATION OP AMOUNT REQUESTED. Line a - On the stcb enter the month, day, and year of the ending of the accounting period to which this annunt applies, Enter program outlays to dale in the appropriate columns. For reports which are prepared on a cash basis, outlays are the sum of actual cash disbursemeets for goods and services, the amount of iydieect expenses charged, the value of in-kind contributions applied, and theamnunt of cash advances and payments evade to sub' contractors and subqravreet. Poe reperts prepared on an accrued enpenditure basis, vuglays are the sum of the actual cash disbursements, the amuunt of indirect cv peeses incurred, the value of in-kind contributions ap- plied, amounts owed by the grantee for goods and other property received, amcvntn uwed Icr snrvives pcrformed by employees, contractxrs, svbgrantees, and other payens, and omountt becoming owed I or which vu current service xi' performance is required Live b - Enter the cumulative cash incnm ereceived to date, if repurts are prepared on a cash batis. Fur reports prepared on an accrued expenditure basis, enter the cumulative income curved tu date. Under either basis, enter only the amcunt applicable to program income which was required rv be used fur the prulect or program by the terms of the grant. Lion c - This amount should be the dillerence between the amounts shown on Line a less the amounts shown on Line b. Live d - Only when making eeqvests for advance pay' mentn, evtee the total estimated amount of cash outlays that will be erade during the period covered by the ad- Lien e - Enter the total of Livesc and d. Live t - Enter the von-Federal share of the amount shown on Liven. Live g - Enter the Federal share of the amount shown on Line h - ~.nter the cumulative amcunt of Federal pay- ments received and amounts included iv outstanding re- quests. Line i - Enter the Federal share now requested. ILive minus Line hI. Live j - Show the amount of advances required by month on each of Liens 111, 121, and 131 when requested by the Federal granter agency for use iv making pee- scheduled advances. Item 12 - This space is procided for any explanation deemed necessary by the grantee and for any information required by the Federal grantor agency iv cumpliance with the governing legislatiun. Item 13 - Complete the certification before submitting this report. 305 Pigure 1 INSTRUCTIONS FOR PREPARING THE REQUEST FOR ADVANCE OR REIMBURSEMENT Page 2-7 .. PAGENO="0312" 306 j 3300.8 * Figure U.S. DEPARTMENT OF ROUSING AND URBAN DEVELOPMENT FEDERAL DISAST ER ASSISTANCE ADMINISTRATION STATEMENT OF DISBURSEMENTS COVERING AMOUNT CLAIMED FROM THE FEDERAL DISASTER ASSISTANCE ADMINISTRATION FOR STATE AND LOCAL PLANS 0 05000CC NAN HER , . INSTRUCTIONS: Prspsee on onpino! cod 2 copies of this form ond as origins! cod 3 cOpieN of the coocher (SF 1034) - submit oil copies to the FDA/I Regional Office; List on!> disbocsenrents actually mode dons9 the current month; List gross salaries. The State I I ~anje~ ON s0eded far their sos one. scau:a prepare oao:o:ona~ -~ - STATE OF * :~. CHECK NUMBER DELIVERY RICLESO PERFORMANCE OF SERVICES LIST DOCUMENTATION BY CATEGORY OF COST IN THE CONTRACT DISBURSEMENTS MONTH DISBURSEMENTS TO DATE AUTHORIZED IN CONTRACT HUB-tA> 15-711 Page 2-8 / PAGENO="0313" 307 3300.8 Figure 3 $t*sd,ed Full 1034 PUEUC VOUCHER FOR PURCHASES AND Y°~ NO. 1034-lit SERVICES OTHER THAN PFRSC~3AL. U.S. RcPu*iu1NlIuu~u 0* tSiA$LI00000T AND LOCuTION PAYEE'S AND ADDRESS * L I ATE OF ORDER DEUVERY OR SERVICE (FNV d,V,~DI ~ ~ uJp!y IAN/Ill-. ~,d dO,. ulf.?.ll.lI..V dusud uuo.,,y) OUAN. ~ PRICE Al-lOONY COST PEE ~) u.,.,,, ..ICI ii ~ (Payee must NOT use thu space be u-.:) TOTAL PAYMENT: APPROVED FOR EXCHANGE RATE = 5100 DITFEEENCES...... O ~ IV' 011040 0 ~ OTLE Au.ouui `.cii,d; 0 ADVANCE ~ u,iii.l,j Pu,uaet to .Ilthal.lp us,l,4 A. u. I c..ht~ that hi, cco,h,, is cuu.ci aId piup., EDT payeu.T. (Dij) (AciN.,iccd Cco~fyi.g 0)Yu.) (Till,) ACCOUNTING CLASSIFICATION CHECK NUMIEE CR4 TREASURET Of THE UNITED STATES CHICK NUMSEE ON (V~o.u .JhaO) CASH DATE PAYEE' .sII dT~hIordCl :~h~h h, u,uc. ouc. .ppNT. (-u ..cople: 340. El-u CANpd,,~. (`coge 2-9 PAGENO="0314" Figure 4 FINANCIAL STATUS REPORT ~-.. - I I I I I * INA F~A~I~A~A g~~1Ay~ . :::...~... PAGENO="0315" 309 3300.8 Figure 4 INSTRUCTIONS FOR PREPARING THE FINANCIAL STATUS REPORT tees I - Ecies Pie c eoithe Fed sig cite ogetey sod icyosce ycsosd dsssicg the sepottscg petiod. Pot cepocts eeįsci lit I clecsRct to cttsoh Ihst sepost is sobscIfed. psepesed tstotI bossectes bc toots of the see sect 2- Esics the yes csssec oshes i ifyog ss,ee- toosesse lot deoscsoe) 5 the ssesyoei of syosed bee essipood by thc Fed tf gescfot sgetoy. the begcstsssg of tht sepost pessod. Lose 4. This tsssoosI shotId be the dii ecie beteseets ~ctooctsthosccocLicesbscdy. Lices. Esstes the of scsoocts slots to Liyessacd Lice 8. Esi she stso.sst petssicitg to the isosFedeesf sluec oI pso~ses tilsys icoisded it the tesooct Liest g. Etsies thc Feysessl sfsse~ of psyy~es otisys. The ss000ct shyld be she difesecti botseec Little scd I. she espois is psepsed oc syysoed espouse bout. hoe bees ieotlded oss Lices thsogh g Oc the fossi espoet. Lice h shodd hoses test bdlosoe. Lists i. Eciet the cocFcdetsl shste of ossysidobligsiiocs Lice j. Ectes the Fedesol shses ci ocpoid tsbligstiocs sfsosct oc Lice h. The testes shoes it the lee shold be the dilieseyte bisect the ossoitis cc Less h ted. Lice k. Ectet the sty of the sctycts shot oc Lices g - bees I - Ecics the etiol toccIstee Scott of Fsdec~f Lice ec. Ectesse ocob:igoised heists ci Fedeest teds. Tics Scott shoild be the diffesecoe bet-eec Lieu tess 11 - INDIRECT EXPENSE b. Rste - Eciec the tofu it effect dsicg INc eepytticg syplied. d. Betel Accooct - Ectes the liii cecil ti isdseyl tout ohssyed dsissg the ccci pisod Pedeosl Shste - Essse she Scott tithe Fedetsl those thsgeddstgfteteposiytsiod. Ii estee hoc tee use oct sped Isseg he psoject pesiod ttsyiseeiih5tsle todloosl~tstesctsocfs.l tees 12- Spoce is psyodtd Its sty seplstofioc ifeetsod Iteec 13- Cotspete the tees fysfot hetose sbesItitg ibis hoes 3- Fetes the spec ted pysssplete tSsieg sddteus. kcoldicg the ZIP oode tot the gsstfee test 4- Eciet Ihe escployet ideyfiftsfiyt stottbes 55- sigced by the U.S. ltfettsl Resect Sesote. sect N- This spots is eeuesoed tot cc 0000ti eoesbes oc othee idectifyity ssctbets ohith stsy be oooigced by the paytee. Itsesc6 scd7 - Mssk the spptopsisto beset. tess B- Foist the tsocth. doy, ted yeos of She begtcitg ted etditg of this ptojeOt pitied. Foe fyseslo gcocs.s tttioh ste coo sstded oc ptoiiot btoie shoto the gtsct Fitted. sees 9- Etsyt the tcsocth dsy ted yes of the bugitcitg sod ecdicg doieo of the petiod fot thiN 5ihit spots is pcepssed. The heqecoy of she sepysy oIl be esosblisfsd bytheFedesslostysotsgecoy. PLEASE READ BEFORE COMPLETIPSS ITEM 10-The posposeot oetfio~I Coltsss Iii thstth IX) s so tsotde Essotiof dsfs its cooN ptogsssc5 Icyfty scd oyfioiiy she bodycl St oppsooed by the Fedete gsssiot syctoy. If additiotsl oolsstto ste ceeded ttt ss soyy oshtiytol Boestssoteedtdssdtsstk'ctctieefcssotsothfottc; hosteyet the sIssssseey tofsls of 511 psoissys. fohofiots Os aotioisies shoold be shotuc it the tool Cylocss of the Poe gtotts pesssicicgtosocg)e Pedetol 955tf peogssc lost slog stoytbetf os seoetsl gsott Utogeotss othioh do sot ce- gui a totyotiotsl ot otfioity llottifltfoy cysts otifte ~ofoecss III thtogh It) she title of she psosssssssl. Pot psoets pectoitieg to scolfipe peogsoess obese ose Os petgsscss teqise s foches bseskdoyc by fotolitt ot ohIo- eqs osessepsssfe fosts foe eooh ptogssss suso.scq she styli- able foslotiocs Os sltioitiel is siposose oysys Ft įssctt hoes ceoetsl p ogssc. psepote s septsose foss os esob aotioityoetyo .:ecseqoessedbytheFedesoiyosctoe tess 10- STATUS OF FUNDS LIce a. Esscy the sotss ooslsys tepossed ot Lice tOe ot the lost sepost. Shy test it this is the isifis) sepost. Lice b. Fetes the toss) gsoso psososs otsoys foe this pisgsaet hsotsse. Pot teposls ethioh se pseossed oe ossis bssis tofloys ste the set of otis) 0th dthotse- eocttsotossstdsshgssyfeet.Pottehysstpseossedtesc she cost isloteesp los diptessel it the sssossts toed isy se geattee tot toodo atd tiNes psopesly tested sod its psssteesssdtthtspsyets. Lists. Eeiet thy sssyci of sI ptoqsssss coossse seslited Page 2-11 PAGENO="0316" 310 [ 3300.8 APPENDIX 1. APPLICATION PACKAGE The following is a list of items that States must include in applications to FDAA. This appendix includes copies of forms and formats for those items requiring them. A. BASIC APPLICATION 1. Governor's letter requesting Federal financial assistance (par. 1-4); no format included herein. 2. Part I - Application for Federal Disaster Preparedness Assistance. 3. Part II - Annu~al Budget Information. 4. Part III - State Work Plan. 5. Part IV - Assurances. B. SUPPORTING ATTACHMENTS AND RELATED DATA 1. organizational Characteristics Statement. 2. Clearinghouse (A-95) and other comments. NOTE: Parts I through IV, with supporting attachments and related data, must be submitted in an original and two copies. Page 1 PAGENO="0317" 113300.8 1 AppendIx 1 311 F~, App'so~M DM11 No. PART I APPLICATION FOR FEDERAL DISASTER PREPAREDNESS ASSISTANCE 2. STATE APPLICATION NO. REGION DEPARTMENT CITY STATE ZIP CODE STATE ZIP CODE 6. FEDERAL CATALOG NO. ~ FEOERAL FUNDING REQUESTED 14.702 $ 0 DEVELOPMENT 0 IMPROVEMENT - 9. TyPE~ APPLICA1CI OR REQUES~ OTHER (Spodfy) THE GOVERNOR'S DESIGNATED REPRESENTATIVE CERTIFIES THAT TO THE BEST OF HIS KNOWLEDGE AND BELIEF THE DATA IN THIS APPLICATION ARE TRUE AND CORRECT, AND THAT HE WILL COMPLY WITH THE ATTACHED ASSURANCES IF HE RECEIVES THE GRANT. GNAT 0 D NA S A ~A A 0 11 M N A J FOR FEDERAL USE ONLY 10 Ro~o~o Sidj tIUD423 Page 2 PAGENO="0318" 312 (PART (I INSTRUCTIONS 3300.8 Appendix 1 This form shall be used to make all disaster preparedness assistance requests or to popose changes or amendments. and to reqorst funding for approved grants originally submitted on this form. Submit the original and two copies of this form. (tern 1 - Enter the State clearinghouse identifier. This is the code or rrumberaesigned by the Stare clearinghouse pursuant to Office of Management and Budget Circular No. A95. (tern 2 - Enter the State's application comber or other identifier. ham 3 - Enter the name of the FDAA Region to crihich the application is addressed, and the complete address. (tern 4 - Enter the came of the agency designated by the Gocernor chat soil orsiertake she piart.supported activity, end the complete eddeess of the epplinant. (tarn E - Enter she desmiptiot cares of this poject. tam 6 - Enter the catalog nombnn as shos'sn in the Catalog of Federal Doeneslic Assistance 114.7021. (tern 7 - Enter the amount requested teem the Federal Gcnernment in this cyphvttion. TIes arnoont sirovld agree seth the rural amount shoeon on the cudget in Section A. Column IbI. Part II. For cautions, changes, or aureedriteittt. shots only she amount of the inorcase or sfeveernr. harn6 -Cheek ccc type. tern U - Check she type of application or request. If the `Other" block is checked, spenify the type of change. a. The definitions foe meets used in Item 9 arc as toilcs~s: (If Now Grant ` an action that is being submitted by the State for the first time. (2) Supplemental Onset . an action that pertains to an retreats in the amount of the Federal contribution foe the same period. (Note: Reqcsata fat inyseoaea mvat be receised prsiri so May 22, 1975. for decelypment gtanra.) b. Changes in the ecisting grant . specify one or mere of she foilosrorig: (I) (ecreaso in duration . a request so ecoond the oterk period. (2) Deceases in duration . a request to reduce the eavrk period. 13) Decreme in amount a raqoest to decrease the amount ef the Federal andlor nonFedetal contribution. (rare 10 - Enter the number ci montht that miii be needed to complete the prolent atre. Federal funds ate rude ocailable. tarn 11 - Enter the epprosimate date the poiect a ecpevted to begin. tern 12 - Complete the cernificacion bet ore submitting she appi:vation. (tern 13 - Eetar she dare this application is submitted. Page 3 PAGENO="0319" [13300.8 111 Appendix 1 313 ~ App~o~d 0MB Np. US. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT PART (I ANNUAL BUDGET INFORMATION (B) fr) (d) S S S __________________ S $ $ SECTION B - BUDGET CATECCRIES ___________ ________ GRANT PROGRAM. FUNCTION. OR ACT VITY TOTAL (~) (B) fr) (d) _____________ $ _______ $________ S S S S $ OURCES ____________ ____________ SURGRANTEE OTHER SOURCES TOTAL fr) (d) fr) S ~ $ MAJOR WORK ELEMENT (~) R. OBJECT CLASS CATEGORIES J. T~t~I SECTID (~) 9. 10. `1. TOTAL ____________________________ SECTIC (4) 12. FEDERAL 14. TOTAL SECTION E . BUDGET ESTIMATES C (~) 19. TOTAL SECTION F . OTHER BUDG 22. REMARKS HUD-423.1 (IR4R~MtIIIlI4 RB Rppp~p SId~) (33.74( Page 4 : C~ E OF THE PROJ ECT ING PERIODS (YEARS) (d) S $ _S ~s,ifT46B~Fy) - 23 DATE PAGENO="0320" 314 [ 3300.8 Appendix 1 (PART III INSTRUCTIONS FOR PREPARATION OF ANNUAL BUDGET INFORMATION GENERAL INSTRUCTIONS: Submit the ot:ginel and two copies of this brett. The Budget must accompany saoh application strd each request tot sn amendment to an approeed pant at tecorrrg prorect cone penod. SECTION A. BUDGET SUMMARY: Columte (.1 Enter epproprrere rtcajs work element at sen fctth icc Appendie 1. Pert Ill. State Work Plan, of HUG Handbook. "Requcremfots and Guidelrnes foe State Diecsfer Preparedness Grants. Colutnns IbI. lot. end dl. Enrec the appeoprlete amounts ot (code tended to euppoet the project tot the fetst year. Foe supplemental grenrt and ohangot so eoist:ng grants. ccc seyarete sheott. Enter in Culurrnn IbI the amount of the ,ncreoee or decrease of Federal funde end enter :0 Columnn to) the aenount of the ocreate or decrease of non-Federal funds. f eppropriate. to Coluron (dl toter the rem total budgeted amount in Colceons Ib) and In). Total - Show the totals foe all Colunros used. SECTION B ` BUDGET CATEGORIES: In the coluono heediota (a), IbI, to), etc., eoeert he ascot noajot work eleoneots eorernd in Colurrtrr (a), Seotcon A. toes Athooog?r .1 oust be comnpleted,es appropeiate. tot ~ach oreioo s'uork aleroeot. Line 6H . Show the totalsof linen 6A throcgh 6G in each ocklofo. Line 61' Show the amount of iod:rent costs. Line 6.1. Enter the total of emoitota of lioee 6H and 6). Foe all appltcaoiooe for oewgraote the total eroocot io (toe 6.1 ehoold be the canoe atthetotalamouotshowo in Section A,Colurno (dl. SECTION C . SOURCE OF NON-FEDERAL RESOURCES: Lines 7 .10 . Enter amocots of noo-Fedeeel eetourcen that will be used on the grant. It in-ktod contribuo:one are incltoled. peootde a beint eupleoatioo one separete sheet. Column 1.1 . Eoteo the poogram title. A breekdonun by roejor work elemneot s rot oeoennery. Column IbI . Enter the amount of cash and in-kind cooeoibutioos to be mede by the State as shown :n Sacecon A. Column Id . State appkuaor.t should I eace this column blank uolest the State prockles a portion of tirhgnantee's non -Federel mamrh:ng shame. Column (dl . Enter the amount of cash aod in-lund cootribulloos to be made from all other sources. ,ocludtog scbgraooee's contrtbuttoos. Column 1.1 . Eoteo totals of Culumrn IbI. lot and IdI. - Line 11 . Enmee the total for each of Columns IbI through Ic). The amount in Column tel should be equal to the sum of the amounts in Section A. Column IdI. SECTION D. FORECASTED CASH NEEDS: LinalS ~ she emnuns of cash oerntedbyguarter (tom FOA urtngthe hrat year. Lies 13 . Enter the amotton of cash needed by quartet from all other suuroes durtog the f:rtt yeer. Lie. 14 . Enter the tonal of amounts on Lines 12 end 13. SECTION E . BUDGET ESTIMATES OF FEDERAL FUNDS NEEDED FOR BALANCE OF THE PROJECT: Litsas 15.19 . Enter in Column al the same grant program titles shown in Section C. Column lal. A breakdown by majormork element soot ewesnary. For new appl:oat:unt and continuing grant applications, enter to the proprr Columns amountt of Federal bunds that will be needed ocer the succeeding 2 years. This Section coed not be compltted for amendments, changes, or supplements to (cods fur the current year. SECTION F . OTHER BUDGET INFORMATION: Lina2O Utethisspece ~ oe to euplain she details as eequired. Lies 21 . Enter the type of indireot rate (teocisional, predetermined, final or fioedl than mill be ct effect durtng tha lund:ng penod, she estimated amount of the base to which the rate isa pplitd, end the total tnd:rett eupenle. Linafl . pf00j~~50y0fhereoplansfionseequiredhereinmacyother0omme0ttdmmedno0maaor. Lioa23 Enaerdsmeufneworeecised Part II. Page 5 PAGENO="0321" 315 T 3300.8 NEED FOR ASSISTANCE Appendix 1 PART III - STATE WORK PLAN SECTION A OBJECTIVES AND GENERAL. Based on an analysis of the potential disaster threats to the State and the current status of the State to meet that threat, indicate the specific needs for financial assistance by describing the principal and subordinate objectives of the State preparedness project. At its discretion, the State may submit as part of the application an analysis of its vulnerability to dis- asters. Supporting documentation or testinonies from concerned interests other than the State may also be used. Any relevar~t data based on planning studies should also be included or footnoted. In this regard, the State shall take into account the kinds of disasters to which it is most vulnerable and the resulting require- ments for disaster plans, programs, or capabilities. 2. PRIORITIES. In establishing State objectives, the fol- lowing priorities should be taken into account in developing the State Work Plan: a. To prepare for the efficient and expeditious pro- vision of disaster relief. b. To mitigate potential disaster effects on people and property through warning, e~vacuation, and emergency pro tective measures. c. To reduce the effects of hazards through effective land-use and construction practices and by eliminating or lessening disaster-producing events. SECTION B - PROGRAM DESIGN 1. PROGRAM NARRATIVE. Briefly describe each major work element (i.e., State Emergency Plan, warning system design, disaster-related public information and educa- tion programs, etc.) and the results and benefits ex- pected to be derived in each case. To the extent pos- sible, this should describe deliverable end products. 2. METHODOLOGY. Outline a plan of action indicating the scope of the proposed work and details of how it will be 50-194 0 - 75 - 21 Page 6 PAGENO="0322" 316 3300.8 -~ Appendix 1 accomplished for each major work element of the program by phates, as provided for in the proposed budget. Each work element should be broken into identifiable phases, with a description of the measurable program objectives associated with each phase. Projections of the accom- plishments (milestones) to be achieved throughout the development cycle should be identified on a quarterly basis. 3. PROGRAM INTERACTION. Describe the relationship of the proposed work with other disaster-related plans, pro- grams, and capabilities under development or already completed whether funded by the Federal Government or the State. Describe how the State will coordinate the work under this grant with related work being performed within the State. 4. TECHNICAL ASSISTANCE. Describe anticipated requirements for technical assistance and relate to a specific phase of development by work element. Further identify as specifically as possible the objectives, nature, and anticipated duration of the need for assistance; the recipient agency or organization within the State; the manner in which assistance is to be used; and any other information needed for a full understanding of the re- quested assistance. Page 7 PAGENO="0323" 3300.8 sendix 1 317 * DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT FEDERAL DISASTER ASSISTANCE ADMINISTRATION WASHINGTON. D.C. 20410 PART IV - ASSURANCES T o State hereby assures and certifies that it will comply with the regulations, licies, guidelines, and requirements, including Office of Management and Budget rcular No. A-95, and General Services Administration Federal Management Circulars -4 and 74-7, as they relate to the application, acceptance, and use of deral funds for this federally assisted project. Also, the applicant assures d certifieswith respect to the grant that: It possesses legal authority to apply for the grant; that a resolution, motion, or similar action has been duly adopted or passed as an official act of the applicant's governing body, authorizing the filing of the application, including all understandings and assurances contained therein, and directing and authorizing the person identified as the official repre- sentative of the applicant to act in connection with the application and to provide such additional information as may be required. It will comply with Title VI of the Civil Rights Act of 1964 (P.L. 88-352) and, in accordance with Title VI of that Act, no person in the United States shall, on the grounds of race, color, or national origin, be excluded from participation in, be denied the benefits of, or be otherwise subjected to discrimination under any program or activity for which the applicant receives Federal financial assistance, and will immediately take any measures necessary to effectuate this agreement. It will comply with Title VI of the Civil Rights Act of 1964 (42 USC 2000d) prohibiting employment discrimination where (1) the primary purpose of a grant is to provide employment or (2) discriminatory employment practices will result in unequal treatment of persons who are or should be benefiting from the grant-aided activity. It will comply with the provisions of the Hatch Act which limit the political activity of employees. It will comply with the minimum wage and maximum hours provisions of the Federal Fair Labor Standards Act, as they apply to hospital and educational institution employees of State and local governments. It will establish safeguards to prohibit employees from using their positions for a purpose that is or gives the appearance of being motivated by a desire for private gain for themselves or others, particularly those with whom they have family, business, or other ties. It will give FDAA or the Comptroller General through any authorized representative access to and the right to examine all records, books, papers, or documents related to the grant. It will comply with all requirements imposed by FDAA concerning special requirements of law, program requirements, and other administrative require- ments approved in accordance with GSA Federal Management Circular 74-7 and set forth in the Handbook "Requirements and Guidelines for State Disaster Preparedness Grants." Page 8 PAGENO="0324" 318 3300.8 Appendix 2 APPENDIX 2. PRINCIPLES FOR DETERMINING COSTS APPLICABLE TO GRANTS TO STATE GOVERNMENTS I. OBJECTIVES. This Appendix sets forth principles for determining the allowable costs of programs administered by State governments under development and improvement grants from FDAA. The principles are for the purpose of cost determination and are not intended to identify the circumstances or dictate the extent of Federal and State participation in the financing of a particular grant. No provision for profit or other increment above cost is intended. 2. POLICY GUIDES. Tb,e application of these principles is based on these fundamental premises:~ a. The efficient and effective administration of the grant program through the application of sound management practices is a State government respon- sibility. b. Federal funds expended and accounted for under this grant must be consistent with underlying agreements and program objectives with the State assuming responsibility. * C. Overall management responsibility for the proper and * efficient administration of the grant program rests with the State, taking into account its own unique circumstances and situation. 3. DEFINITIONS. a. Approval or authorization of the Federal Disaster Assistance Administration means documentation evidencing consent prior to incurring specific cost. b. Cost allocation plan means the documentation identi- fying, accumulating, and distributing allowable costs under grants, together with the allocation methods used. c. Cost, as used herein, means cost as determined on a * cash, accrual, or other basis acceptable to FDAA as a discharge of the State's accountability for Federal funds. Page 9 PAGENO="0325" 3300.8 319 Appendix 2 d. Cost objective means a pool, center, or area estab- lished for the accumulation of cost. Such areas include organizational units, functions, objects, or items of expense, as well as ultimate cost objec- tives. e. Grant means an agreement between FDAA and a State government whereby FDAA provides funds to carry out the development or improvement of specific disaster plans, programs, and capabilities. f. Grant program means those activities and operations of the State that are necessary to carry out the purposes of the grant, including any portion of the program financed by the State. g. Other State or local agencies means departments or agencies of the State or local unit that provide goods, facilities, and services to carry out the pur- poses of the grant program. h. Services includes goods and facilities as well as services. 1. Supporting services means auxiliary functions nec- essary to sustain the direct effort involved in administering a grant program or an activity pro- viding service to the grant program. These services may be centralized in the designated State agency or in some other agency or agencies and include procure- ment, payroll, personnel functions, maintenance and operation of space, data processing, accounting, budgeting, and auditing. 4. BASIC GUIDELINES. a. Factors Affecting Allowability of Costs. To be allowable under a grant program, costs must meet the following general criteria: (1) Be necessary and reasonable for proper and effi- cient administration of the grant program, be allocable thereto under these principles, and, except as specifically provided herein, not be a general expense required to carry out the overall responsibilities of State governments. Page 10' PAGENO="0326" 320 3300.8 Appendix 2 (2) Be authorized or not prohibited under State or local laws or regulations. (3) Conform to any limitations or exclusions set forth in these principles, Federal laws, or other governing limitations as to types or amounts of cost items. Note that Regulation 24 CFR 2205.79 (f) prohibits use of funds "to procure or repair equipment, materials, or facilities except that required for administration of the grant." (4) Be consistent with policies, regulations, and procedures that apply uniformly to both feder- ally assisted and other activities of the State. (5) Be accord~d consistent treatment through appli- cation of generally accepted accounting princi- ples appropriate to the circumstances. (6) Not be allocable to or included as a cost of any other federally financed program in either the current or a prior period. (7) Be net of all applicable credits. b. Allocable Costs. (1) Benefits Received. A cost is allocable to a particular cost objective to the extent of benefits received by such objective. (2) Shifting. Any cost allocable to a particular grant or cost objective under the principles provided in this Appendix may not be shifted to other Federal grant programs to overcome fund deficiencies, to avoid restrictions imposed by law or grant agreements, or for other reasons. Joint Cost. Where an allocation of joint cost will ultimately result in charges to a grant program, an allocation plan will be required. (1) Receipts or Reductions. Applicable credits refer to those receipts or reductions of expenditure- type transactions that offset or reduce expense items allocable to grants as direct or indirect (3) c. Applicable Credits. Page 11 PAGENO="0327" [ 3300.8 321 Appendix 2 costs. Examples cf such transactions are: purchase discounts; rebates or allowances; recoveries or indemnities on losses; sale of publications,equipnient, and scrap; income from personal or incidental services; and adjustments of overpayments or erroneous charges. (2) Federal Funds. Applicable credits may also arise when Federal funds are received or are available from sources other than the grant program involved to finance operations or capital items of the State. This includes costs arising from the use or depreciation of items donated qr financed by the Federal Government to fulfill matching requirements under another grant program. These types of credits should likewise be used to reduce related expenditures in determining the rates or amounts applicable to grants covered by this Handbook. 5. COMPOSITION OF COST. a. Total Cost. The total cost of a grant program is comprised of the allowable direct cost incident to its performance, plus its allocable portion of allowable indirect costs, less applicable credits. b. Classification of Costs. There is no universal rule for classifying certain costs as either direct or indirect under every accounting system. A cost may be direct with respect to some specific service or function but indirect with respect to the grant or other ultimate cost objective. It is essential, therefore, that each item of cost be treated con- sistently either as a direct or an indirect cost. Specific guides for determining direct or indirect costs allocable under grant programs are provided in the sections that follow. 6. DIRECT COSTS. Direct costs are those that can be identified specifically with a particular cost objective. These costs may be charged directly to the grant. Direct costs may also be charged to cost objectives used for the accumulation of costs pending distribution in due course to grants and other ultimate cost objectives. Typical direct costs chargeable to grant programs are: Page 12 PAGENO="0328" 3300.8 App endix 2 7. INDIRECT COSTS. a. Compensation of employees for time and effort devoted specifically to the execution of grant programs discussed in this Handbook. b. Cost of materials acquired, consumed, or expended specifically for the administration of the grant. c. Equipment and other approved capital expenditures. d. Other items of expense incurred specifically to carry out the grant. e. Services furnished specifically for the grant program by other agencies, provided such charges are con- sistent with criteria outlined in paragraph 8 of these principles. a. General. Indirect costs are those (1) incurred for a common or joint purpose benefiting more than one cost objective, and (2) not readily assignable to the cost objectives specifically benefited, without effort disproportionate to the results achieved. The term "indirect costs," as used herein, applies to costs of this type originating in the designated State agency or agencies, as well as those incurred by other departments in supplying goods, services, and facilities to the designated State agency. To facilitate equitable distribution of indirect expenses to the cost objectives served, it may be necessary to establish a number of pools of indirect cost. Indirect cost pools should be distributed to benefiting cost objectives on bases that will produce an equitable result in consideration of relative benefits derived. b. State Departmental. State departmental indirect costs, including the various levels of supervision, are eligible for allocation to grant programs pro- vided they meet the conditions set forth in this Appendix. S. COST INCURRED BY AGENCIES OTHER THAN THE DESIGNATED STATE AGENCY. The cost of service provided by other agencies may include only allowable direct costs of the ,service plus a pro rata share of allowable supporting 322 Page 13 PAGENO="0329" 113300.8 323 ~~ppendix 2 costs and supervision directly required in performing the service but not supervision of a general nature (such as that provided by the head of a department and his staff assistants not directly involved in operations). However, supervision by the head of a department or agency whose sole function is providing the service furnished would be an eligible cost. Supporting costs include those furnished by other units of the supplying department or by other agencies. 9. COST ALLOCATION PLAN. a. General. A plan for allocation of costs will be required to support the distribution of any joint costs related to the grant program. All costs included in the plan shall be supported by formal accounting records that will substantiate the propriety of eventual charges. b. Requirements. The allocation plan of the designated State agency should cover all joint costs as well as costs to be allocated under other agencies' or organizational units' plans that are to be included in the cost of grants covered by this Handbook. The cost allocation plans of all the agencies rendering services to the designated State agency should be presented in a single document, to the extent feasible. The allocation plan should contair, but not necessarily be limited to, the nature and extent of services provided and their relationship to the relevant grant programs, the items of expense to be included, and the methods to be used in distributing cost. Page 14 PAGENO="0330" r 3300.8 1. PURPOSE AND APPLICABILITY. CO St. Appendix 3 APPENDIX 3.. STANDARDS FOR SELECTED ITEMS OF COST a. Objective. This Appendix provides standards for determining the allowability of selected items of b. Application. These standards will apply irrespective of whether a particular item of cost is treated as direct or indirect cost. Failure to mention a particular item of cost in the standards is not intended to imply that it is either allowable or unallowable; rather determination of allowability in each case should be based on the treatment of standards provided for similar or related items of cost. The allowability of the selected items of cost is subject to the principles stated in Appendix 2 of this Handbook. a. Accounting. The cost of establishing and maintaining accounting and other information systems required for the management of grant programs is allowable. This includes cost incurred by central service agencies for these purposes. The cost of maintaining central accounting records required for overall State and local government purposes, such as appropriation and fund accounts by the Treasurer, Comptroller, or similar officials, is considered to be a general expense of government and is not allowable. b. Advertising. Advertising media include newspapers, magazines, radio and television programs, direct mail, trade papers, and the like. The advertising costs allowable are those solely for: (1) Recruitment of personnel required for the grant program. (2) Solicitation of bids for the procurement of goods and services required. 2. ALLOWABLE COSTS 324 Page 15 PAGENO="0331" ~[ 3300.8 325 Appendix 3 (3) Disposal of *scrap or surplus materials acquired - in the performance of the grant. (4) Other purposes specifically provided for in the grant agreement. c. Advisory Councils. Costs incurred by State advisory councils or committees established pursuant to Federal requirements to carry out grant programs are allowable. The cost of like organizations is allow- able when provided for in the grant agreement. d. Audit Service. The cost of audits necessary for the administration, and management of functions related to the grant program is allowable. e. Budgeting. Costs incurred for the development, preparation, presentation, and execution of budgets are allowable. Costs for services of a central bud- get office are generally not allowable, since these are costs of general government. However, where employees of the central budget office actively participate in the State agency budget process, the cost of identifiable services is allowable. f. Communications. Communication costs incurred for telephone calls or service, telegraph, teletype service, wide area telephone service (WATS), cemtrex (tie lines), postage, messenger service, and similar services are allowable. g. Compensation for Personal Services. (1) General. Compensation for personal services includes all remuneration, paid currently or accrued, for services rendered during the period of performance under the grant agreement, including but not necessarily limited to wages, salaries, and supplementary compensation and benefits. The costs of such compensation are allowable to the extent that total compensation for individual employees (1) is reasonable for the services rendered, (2) follows an appoint- ment made in accordance with State or local; government laws and rules and meeting Federal merit system or other requirements where Page 16 PAGENO="0332" 326 1 3300.8 1 Appendix 3 applicable, and (3) is determined and supported as provided in paragraph (2) below. Compensation for employees engaged in federally assisted activities will be considered reasonable to the extent that it is consistent with that paid for similar work in other activities of the State or local government. Should the skills required for the federally assisted activities not be available within the State or local governments, compensation will be considered reasonable to the extent that it is comparable to that paid for similar work in the labor market in which the employing government competes for the kind of employees involved. Compensation surveys providing data representative of the labor market involved will be an acceptable basis for evaluating reasonableness. (2) Payroll and Distribution of Time. Amounts charged to grant programs for personal services, regardless of whether treated as direct or indirect costs, shall be based on payrolls documented and approved in accordance with generally accepted practice of the State or local agency. Payrolls must be supported by time and attendance or equivalent records for individual employees. Salaries and wages of employees chargeable to more than one grant program or other cost objective shall be supported by appropriate time distribution records. The method used should produce an equitable distribution of time and effort. h. Depreciation and Use Allowances. (1) The State may be compensated for the use of buildings and equipment, through use allowances or depreciation. Use allowances are the means of providing compensation in lieu of depreciation or other equivalent costs. However, a combina- tion of the two methods nay not be used in connection with a single class of fixed assets. (2) The computation of depreciation or use allowance shall be based on acquisition cost. Where actual cost records have not been maintained, a Page 17 PAGENO="0333" [~3OO.8 327 Appendix 3 reasonable estimate of the original acquisition cost may be used in the computation. The computation will exclude the cost or any portion of the cost of buildings and equipment donated or borne directly or indirectly*by the Federal Government through charges to Federal grant programs or otherwise, irrespective of where title was originally vested or where it presently resides. In addition, the computation will also exclude the cost of land. Depreciation or use allowance on idle or excess facilities is not allowable. (3) Where the, depreciation method is followed, adequate property records must be maintained, and any generally accepted method of computing depreciation must be consistently applied for any specific asset or class of assets for all affected federally sponsored programs and must result in equitable charges, considering the extent of the use of the assets for the benefit of such programs. (4) In lieu of depreciation, a use allowance for a building may be computed at an annual rate not exceeding 2 percent of acquisition cost. The use allowance for equipment (excluding items of property capitalized as building cost) shall be computed at an annual rate not exceeding 6-2/3 percent of acquisition cost of usable equipment. (5) No depreciation or use charge may be allowed on any assets that would be considered as fully depreciated, provided, however, that reasonable use charges may be negotiated for any such assets if warranted after taking into considera- tion the cost of the facility or item involved, the estimated useful life remaining at the time of negotiation, the effect of any increased maintenance charges or decreased efficiency due to age, and any other factors pertinent to the utilization of the facility or item for the purpose contemplated. Page 18 PAGENO="0334" 328 [ 3300.8 1 Appendix 3 1. Employee Fringe Benefits. Costs identified under (1). and (2) below are allowable to the extent that total compensation for employees is reasonable. (1) Employee benefits in the form of regular compensation paid to employees during periods of authorized absences from the job, such as for annual leave, sick leave, court leave, military leave, and the like, if they are provided pursuant to an approved leave system and the cost thereof is equitably allocated to all related activities, including grant programs. (~2) Employee benefits in the form of employers' contribution or expenses for social security, employees' life and health insurance plans, unemployment insurance coverage, workmen's compensation insurance, pension plans, severance pay, and the like, provided such benefits are granted under approved plans and are distributed equitably to grant programs and to other activities. j. Exhibits. Costs of exhibits relating specifically to the grant programs are allowable. k. Materials and Supplies. The cost of materials and supplies necessary to carry out the grant programs is allowable. Purchases made specifically for the grant program should be charged thereto at their actual prices after deducting all cash discounts, trade discounts, rebates, and allowances received by the State. Withdrawals from general stores or stockrooms should be charged at cost under any recognized method of pricing consistently applied. Incoming transportation charges are a proper part of material cost. 1. Memberships, Subscriptions, and Professional (1) Memberships. The cost of membership in civic, business, technical, and professional organi- zations is allowable provided: (a) the benefit from the membership is related to the grant program, (b) the expenditure is for agency Activities. Page 19 PAGENO="0335" 3300.8 329 Appendix 3 membership, (c) the cost of the membership is reasonably related to the value of the services or benefits received, and (d) the expenditure is not for membership in an organization that devotes a substantial part of its activities to influencing legislation. (2) Reference Material. The cost of books or of subscriptions to civic, business, professional, and technic~l periodicals is allowable when related to the grant program. (3) Meetings and Conferenc~~. Costs are allowable when the ,primary purpose of the meeting is the dissemination of technical information relating to the grant program and they are consistent with regular practices followed for other activities of the State. m. Motor Pools. The costs of a service organization that provides automobiles to State agencies at a mileage or fixed rate and/or provides vehicle maintenance, inspection, and repair services are allowable. n. Payroll Preparaj~pp~. The cost of preparing payrolls and maintaining necessary related wage records is allowable. o. Personnel AdministratiR. Costs for recruitment, examination, certification, classification, training, establishment of pay standards, and related activities for grant programs are allowable. p. Printing and Reproduction. Costs for printing and reproduction services necessary for grant administra- tion, including but not limited to forms, reports, manuals, and informational literature, are allowable. Publication costs of reports or other media relating to grant program accomplishments or results are allowable when specifically authorized by the FDAA Regional Director. q.' Procurement Sery~į~. The cost of procurement service, including solicitation of bids, preparation and award of contracts, and all phases of contract administra- tion in providing goods, facilities, and services for grant programs, is allowable. Page 20 PAGENO="0336" 330 [~33OO.8 1 Appendix 3 r. Training and Education. The cost of in-service training, customarily provided for employee develop- ment that directly or indirectly benefits grant programs, is allowable. Out-of-service training involving extended periods of time is allowable only when specifically authorized by the FDAA Regional Director. s. Transportation. Costs incurred for freight, cartage, express, postage, and other transportation costs relating to goods either purchased, delivered, or moved from one location to another ~re allowable. t. Travel. Traved. costs are allowable for expenses for transportation, lodging, subsistence, and related expenses incurred by employees who are in travel status on official business related specifically to the grant program. Such costs may be charged on an actual basis, on a per diem or mileage basis in lieu of actual costs incurred, or on .a combination of the two, provided the method used is applied to an entire trip and results in charges consistent with those normally allowed in like circumstances in nonfederally sponsored activities. The difference in cost between first-class air accommodations and less-than-first-class air accommodations is unallow- able except when less-than-first-class air accom- modations are not reasonably available. 3. COSTS ALLOWABLE WITH FDAA APPROVAL. a. Automatic Data Processing. The cost of data process- ing services to grant programs is allowable. This cost may include rental of equipment or depreciation on State-owned equipment. The acquisition of equip- ment, whether by outright purchase, rental-purchase agreement, or other method of purchase, is ünallow- able. b. Building Space and Related Facilities. The rental cost of space in privately or publicly owned buildings used for the benefit of the grant program is allow- able subject to the conditions stated below. The total cost of space, whether In a privately or publicly owned building, may not exceed the rental Page 21 PAGENO="0337" [~_ 3300.8 331 Appendix 3 cost of comparable space and facilities in a privately owned building in the same locality. The cost of space procured for grant program usage may not be charged to the program for periods of nonoccupancy without authorization of the FDAA Regional Director. (1) Rental cost. The rental cost of space in a privately owned building is allowable. (2) Depreciation and use allowances on publiį~y owned buildings are allowable as provided for in 2.h. of this Appendix. c. Insurance and ~Indemnification. (1) Costs of insurance requirec1, or approved and main- tained pursuant to the grant agreement, are allow- able. (2) Costs of other insurance in connection with the general conduct of activities are allowable subject to the following limitations: (a) Types and extent and cost of coverage shall be in accordance with general State or local government policy and sound business practice. (b) Costs of insurance or of contributions to any reserve covering the risk of loss of, or damage to, Federal Government property are unallowable except to the extent that the FDAA Regional Director has specifically required or approved such costs. (3) Contributions to_a res~~y~ for a self-insurance program approved by the FDAA Regional Director are allowable to the extent that the type of coverage, the extent of coverage, and the rates and premiums would be allowed had insurance been purchased to cover the risks. (4) Actual losses that could have been covered_1iy~ perrniss~bl~ i~nsurance (through an approved self-insurance program or otherwise) are unallowable unless expressly provided for. How- ever, costs incurred because of losses not 50-194 0 - 75 - 22 Page 22 PAGENO="0338" 332 3300.8 Appendix 3 covered under nominal deductible insurance coverage provided in keeping with sound manage- nent practice, and minor uninsured losses that occur in the ordinary course of operations, are allowable. (5) Indemnification includes securing the State against liabilities to third persons and other losses not compensated by insurance or other- wise. The Federal Government is obligated to indemnify the State only to the extent expressly provided for by separate agreement, except as provided in (4) above. d. Management Studies. The cost of management studies to improve the effectiveness and efficiency of grant management for ongoing programs is allowable, except that the cost of studies performed by agencies other than the designated State agency or agencies or out- side consultants is allowable only when authorized by the FDAA Regional Director. e. Preagreement Costs. Costs incurred prior to the effective date of the grant, if they would have been allowable thereunder if incurred after such date, are allowable when specifically provided for in the grant agreement. f. Professional Services. Costs of professional ser- vices rendered by individuals or organizations not a part of the designated State agency or agencies are allowable if approved in advance by the FDAA Regional Director. 4. UNALLOWABLE COSTS. a. Bad Debts. Any losses arising from uncollectible accounts and other claims, and related costs, are unallowable. b. Contingencies: Contributions to a contingency reserve or any similar provision for unforeseen events are unallowable. c. Contributions and Donations. Unallowable. *Page 23 PAGENO="0339" [~33OO.8 3 333 Appendix d. Entertainment. Costs of amusements, social activi- ties, and incidental costs relating thereto, such as meals, beverages, lodgings, rentals, transporta- tion, and gratuities, are unallowable. e. Fines and Penalties. Costs resulting from violations of, or failure to comply with, Federal, State, and local laws and regulations are unallowable. f. Governor's Expenses. The salaries and expenses of the Office of the Governor of a State or the chief executive of a political subdivision are considered a cost of general State or local government and are unallowable. g. Interest and other Financial Costs. Interest on borrowings (however represented), bond discounts, and cost of financing and refinancing operations, and legal and professional fees paid in connection therewith, are unallowable except when authorized by Federal legislation. h. Legislative Expenses. Salaries and other expenses of the State legislature or similar local govern- mental bodies such as county supervisors, city councils, or school boards, whether incurred for purposes of legislation or executive direction, are un~r.i1owable. 1. Underrecovery of Costs under Grant Agreements. Any excess of costs over the Federal contribution under one grant agreement is unallowable under other grant agreements. Page 24 PAGENO="0340" 334 3300.8 11111 Appendix 4 APPENDIX 4. PROCUREMENT STANDARDS 1. GENERAL. This Appendix provides standards for use by State governments in establishing procedures for the procurement of supplies, equipment, and other services with Federal grant funds. These standards are furnished to ensure that such materials and services are obtained in an effective manner and in compliance with the pro- visions of applicable Federal law and Executive orders. 2. STATE RESPONSIBILITY. The standards contained in this Appendix do not relieve the State of the contractual responsibilities arising under its contracts. In support of grants covered 4n this Handbook, the State is the responsible authority, without recourse to FDAA, regard- ing the settlement and satisfaction of all contractual and administrative issues arising out of procurements entered into. This includes disputes, claims, protests of award, source evaluation, or other matters of a contractual nature. Matters concerning violation of- the law are to be referred to such authorities as may have proper jurisdiction. 3. STATE REGULATIONS. A State may use its own procurement regulations that reflect applicable State and local law, rules, and regulations, provided that procurements made with Federal grant funds adhere to the standards set forth as follows: a. Standards of Conduct. The State shall maintain a code or standards of conduct that shall govern the performance of its officers, employees, or agents in contracting with and expending Federal grant funds. State officers, employees, or agents shall neither solicit nor accept gratuities, favors, or anything of monetary value from contractors or potential contractors. To the extent permissible by State or local law, rules, or regulations, such standards shall provide for penalties, sanctions, or other disciplinary actions to be applied for violations of such standards either by the State officers, employees, or agents or by contractors or their agents. b. Procurement Transactions. All procurement trans-i actions regardless of whether negotiated or advertised and without regard to dollar value shall be conducted Page 25 PAGENO="0341" El 3300.8 TheState shall provide, as a requirements: Appendix 4 in a manner so as to provide maximum open and free competition. The State should be alert to organiza- tional conflicts of interest or noncompetitive practices among contractors that may restrict or eliminate competition or otherwise restrain trade. c. Procurement Procedural Reauirements. establish procurement procedures that minimum, for the following procedural (1) Proposed procurement actions shall be reviewed by State officials to avoid purchasing unneces- sary or duplicative services. (2) Invitatio~is for bids or requests for proposals shall be based upon a clear and accurate description of the technical requirements for the material, product, or service to be procured. Such description shall not, in competitive pro- curements, contain features that unduly restrict competition. (3) Positive efforts shall be made by the State to utilize small business and minority-owned business sources of supplies and services. Such efforts should allow these sources the maximum feasible opportunity to compete for contracts to be performed utilizing Federal grant funds. (4) The type of procuring instruments used (i.e., fixed price contracts, cost reimbursable con- tracts, purchase orders, incentive contracts, etc.) shall be appropriate for the particular procurement and for promoting the best interest of the grant program. The "cost-plus-a- percentage-of-cost" method of contracting shall not be used. (5) Formal advertising, with adequate purchase description, sealed bids, and public openings, shall be the required method of procurement unless negotiation pursuant to paragraph (6) below is necessary to accomplish sound procure- ment. However, procurements of $2,500 or less need not be so advertised unless otherwise 335 Page 26 PAGENO="0342" 336 3300.8 1 Appendix 4 required by State or local law or regulations. Where such advertised bids are obtained, the awards shall be made to the responsible bidder whose bid is responsive to the invitation and is more advantageous to the State, price and other factors considered. (Factors such as discounts, transportation costs, and taxes may be considered in determining the lowest hid.) Invitations for bids shall clearly set forth all requirements that the bidder must fulfill in order for his bid to be evaluated by the State. Any or all bids may be rejected when It is in the State's interest to do so and such reje,ctions are in accordance with appli- cable State and local law, rules, and regulations. (6) Procurements may be negotiated if it is imprac- ticable and infeasible to use formal advertising. Generally, procurements may be negotiated by the State if: (a) The public exigency will not permit the delay incident to advertising. (b) The service to be procured is available from only one person or firm. (All contemplated sole source procurements in which the aggregate expenditure is expected to exceed $5,000 shall be referred to the FDAA Regional Director for prior approval.) The aggregate amount involved does not exceed $2,500. (d) The contract is for personal or professional services, or for any service to be rendered by a university, college, or other educa- tional institution. (e) No acceptable bids have been received aft~r formal advertising. (7) Notwithstanding the existence of circumstances justifying negotiation, competition shall be obtained to the maximum extent practicable. (c) Page 27 PAGENO="0343" 337 ~300.8 Appendix 4 (8) Contracts shall be made only with responsible contractors who possess the potential ability to perform successfully under the terms and conditions of a proposed procurement. Con- sideration shall be given to such matters as contractor integrity, record of past perform- ance, financial and technical resources, and accessibility to other necessary resources. (9) Procurement records or files for purchases in amounts in excess of $2,500 shall provide at least the following pertinent information: justification for use of negotiation in lieu of advertisi~ig, contractor selection, and the. basis for the cost or price negotiated. (10) A system for contract administration shall be maintained to assure contractor conformance with terms, conditions, and specifications of the contract or order, and to assure adequate and timely followup of all purchases. d. Additional Requirements. The State shallinclude, in addition to provisions to define a sound and complete agreement, the following provisions in all contracts and subgrants: (1) Contracts shall contain such contractual provisions or conditions that will allow for administrative, contractual, or legal remedies when contractors violate or breach contract terms, and provide for such sanctions and penalties as may be appropriate. (2) All contracts in excess of $2,500 shall contain suitable provisions for termination by the State, including the manner of termination and the basis for settlement. In addition, such con- tracts shall describe conditions under which the contract may be terminated for default as well as conditions under which the contract may be terminated because of circumstances beyond the control of the contractor. (3) Contracts or agreements (a) intended mainly to create, develop, or improve products, processes, Page 28 PAGENO="0344" 338 [ 3300.8 1 Appendix 4 or methods; (b) for exploration into fields that directly concern public health, safety, or welfare; or (c) in a field of science or technology in which there has been little significant experience outside of work funded by Federal assistance shall contain a notice to the effect that matters regarding rights to materials generated under the contract or agreement are subjectto the regulations issued by FDAA and the State. The contractor shall be advised as to the source of additional information regarding these matters. (4) All negotiated contracts (except those of $2,500 or less) awarded by the State shall include a provision to the effect that the State, the Federal Disaster Assistance Administration, and the Comptroller General of the United States, or any of their duly authorized representatives, shall have access to any books, documents, papers, and records of the contractor that are directly pertinent to a specific grant program, for the purpose of making audit, examination, excerpts, and transcriptions. Page 29 PAGENO="0345" [ 3300.8 339 ~jpendix 5 APPENDIX 5. MATCHING SHARE 1. PURPOSE. This Appendix sets forth criteria and procedures for the allowability and evaluation of cash and in-kind contributions made by State and local governments in satisfying matching share requirements for improvement grants available under P.L. 93-288. 2. DEFINITI0N~. The following definitions apply for the purpose of this Appendix: a. Project.Costs. Project costs are all necessary charges made by a State in accomplishing the objectives of ~ grant during the grant period. For matching-share purposes, project costs are limited to the allowable types of costs as set forth in Appendixes 2 and 3 of this Handbook. b. Matching Share. Matching share represents that portion of project costs not borne by the Federal Government. c. Cash Contributions. Cash contributions represent the State's cash outlay, including the outlay of money contributed to the State by other public agencies and institutions and by private organiza- tions and individuals. d. In-Kind Contributions. In-kind contributions represent the value of noncash contributions pro- vided by (1) the State, (2) other public agencies and institutions, and (3) private organizations and individuals. In-kind contributions may consist of charges for real property and equipment and the value of goods and services directly benefiting and specifically identifiable to the grant program. 3. COMPUTATION OF MATCHING SHARE. Matching share may consist of: a. ~~ject Costs. Charges incurred by the State as project costs. Not all charges require cash outlays by the State during the grant period: examples are depreciation and use charges for buildings a~d equipment. Page 30 PAGENO="0346" 340 L3300.8 Appendix 5 b. Cash Contributed or Donated. Project costs financed with cash contributed by the State or-donated to the State by other public agencies and institutions, private organizations, and individuals. c. Services and Real or Personal Property. Project costs represented by services and real or personal property, or use thereof, donated by other public agencies and institutions, private organizations, and individuals. 4. IN-KIND CONTRIBUTIONS. All in-kind contributions shall be accepted as part of the State's matching share when such coptributions meet the following criteria: a. Are identifiable from the State's records. b. Are not included as contributions for any other federally assisted program. c. Are necessary and reasonable for proper and efficient accomplishment of project objectives. d. Conform to other provisions of this Appendix. 5. VALUATION OF IN-KIND CONTRIBUTIONS. a. Volunteer Services. Volunteer services may be furnished by professional and technical personnel, consultants, and other skilled and unskilled labor. Each hour of volunteered service may be counted as matching share if the service is an integral and necessary part of an approved program. (1) Rates for volunteer services. Rates for volunteers should be consistent with those regular rates paid for similar work in other activities of the State or local government. In cases in which the kinds of skills required for the federally assisted activities are not found inthe other activities of the State, rates used should be consistent with those paid for similar work in the labor market in which the State competes for the kind of services involved. -Page 31 PAGENO="0347" 341 [~33OO.8 11 Appendix 5 (2) Volunteers emj~loyed_by other organizations. When an employer other than the State furnishes the services of an employee, these services shall be valued at the employee's regular rate of pay (exclusive of fringe benefits and overhead cost), provided these services are in the same skill for which the employee is normally paid. b. Valuation of Materials. COntributed materials can include office supplies, maintenance supplies, and workshop and classroom supplies. Prices assessed to donated materials included in the matching share should be reasonable and should not exceed the costs of the materiaLs to the donor or current market prices, whichever are less at the time they are charged to the project. c. Valuation of Donated Egui~ment, Buildings, and Land, or Use of Space. Depreciation and use charges for equipment and buildings may be made. The value of donated equipment or buildings should be based on the donor's cost less depreciation or the current market price of similar property, whichever is less. d. Valuation of Other Chaygg~. Other necessary charges incurred specifically for and in direct benefit to the grant program in behalf of the State may be accepted as matching share,. provided that they are adequately supported and permissible under the law. Such charges must be reasonable and properly justifiable. 6. SUPPORTING RECORDS. The following requirements pertain to the State's supporting records for in-kind contribution from private organizations and individuals: a. Volunteer Services. The number of hours of volunteer services must be supported by the same methods used by the State for its employees. b. Documentation.~ The basis for determining the charges for personal services, material, equipment, buildings, and land must be documented. 1/ Page 32 PAGENO="0348" 342 Senator BURDICK. Senator Montoya wifi now take the Chair. STATEMENT OP HON. JOSEPH M. MONTOYA, U.S. SENATOR PROM THE STATE OP NEW MEXICO Senator MONTOYA [presiding]. We meet this morning at this phase of the hearings to review the administration's budget submission to Congress for the three agencies whose authorizing legislation falls under the jurisdiction of the Subcommittee on Economic Development. I refer to those programs authorized by the Economic Development Act of 1965 as amended, including the programs of the Economic Development Administration and the Title V Regional Action Plan- ning Commissions and to the Appalachian Regional Development Act of 1965, as amended, authorizing the programs of the Appalachian Regional Commission. The witnesses for these agencies are to appear this morning to give program dimension to the dollar figures submitted to Congress in the Budget. These hearings are in the nature of a dry run and are being held so that the Public Works Committee can meet its requirements under the Congressional Budget and Impoundment Control Act of 1974. Our committee was asked to prepare a report this month to the Budget Committee setting forth our assessment of the President's current budget submission. In that process, we want to look at the program policies of the agencies as they relate to the changing needs of the country. We want to ask questions concerning program modifications, shifts in program emphasis and new programs to be developed within the framework of future policy. What will be the cost of these changes? We also want to look at the progress of the present program. We shall begin with EDA this morning. Our schedule is tight. After the completion of EDA, ARC and the title V people will appear in that order. We have with us this morning Assistant Secretary Mizell. I want to congratulate you~, Congressman Mizell, now Assistant Secretary, on your confirmation as the EDA's fifth administrator. You are in dis- tinguished company with your former colleagues and I say this in all modesty. STATEMENT OP WILI~ER D. MIZELL, SR., ASSISTANT SECRETARY OP COMMERCE FOR ECONOMIC DEVELOPMENT, ACCOMPANIED BY HERBERT S. BECKER, DIRECTOR, OFFICE OP ADMINISTRATION AND PROGRAM ANALYSIS; THOMAS W. HARVEY, ACTING CHIEP COUNSEL; JOSEPH G. HAMRICK, DEPUTY ASSISTANT SECRETARY FOR ECONOMIC DEVELOPMENT PLANNING; NATHAN L. MARYN, SPECIAL ASSISTANT TO DEPUTY ASSISTANT SECRETARY FOR ECONOMIC DEVELOPMENT; BRIAN B. WHALEN, CHIEF, BUDGET DIVISION Mr. MIZELL. Thank you very much, Mr. Chairman. Senator MONTOYA. I wish you well in the tough job you have before you. Since you are Senator Morgan's constituent, I defer to him at this time. Do you want to welcome your colleague or have you already? PAGENO="0349" 343 Senator MORGAN. I have already, Mr. Chairman. Senator MONTOYA. If there is no objection by the committee, we will incorporate your statement in the record. (See p. 364.) You may proceed to summarize it. Then we will ask you a few questions. Mr. MIZELL. Thank you, Mr. Chairman. It is a real pleasure for me to appear before this committee today. Also, I appreciate the kind words of the chairman and of my Senator from North Carolina, Mr. Chairman. He just shot his best shot for me the other day when I was up for confirmation. I really appre- ciated that very much. I am happy that I am here not as the designate, but as the Assistant Secretary, having been confirmed by this com- mittee and the Senate. The President has signed my certificate. So, I am finally on board. I really thought about the possibility of being caught in a flood or a tornado or a hurricane, but never in a filibuster as we were last week. So it feels good to be on board officially. Senator MONTOYA. You are the only one from the South that ever acquired fringe benefits through a filibuster. Mr. MIZELL. It was great; I appreciate it. I would like to summarize our budget and then try to respond to your questions and provide the information that the committee is seeking and needs in order to fulfill its responsibilities and role as it relates to EDA. Our budget request totals $314,271,000 in budget authority, which is $44,421,000 above the amount appropriated for this fiscal year. Outlays for fiscal year 1976 are estimated to be $259,585,000. I am sure you will have a number of specific questions about the budget, and I have a number of my associates with me. We will be delighted to try to respond. I would like to touch briefly on a number of questions that were raised last week, one in relation to title X and its status. I would report to the committee on the agencies that we have surveyed. There are some 44 Federal agencies that we have surveyed, and at this point, we have received requests back from 43 of those agencies. Included in those requests are over 18,000 potential projects from EDA, the regional commissions, and the other Federal agencies. Total Federal cost is about $3 billion, exclusive of the $11 billion ICC proposal. The estimate for man-months of employment is about $3 million. We have not had a chance to analyze with the Department of Labor many of the submissions as to their reasonableness for title X investment. Mr. Chairman, I also received a letter from Chairman Randolph, with some specific questions about title X, which we will provide in the future. Another question that was raised by Senator Domenici, that I look into the status of the EDA's Indian budget. I find that we plan to obligate $27.7 million during fiscal year 1975, not including PWIP projects. Included in the President's budget request for fiscal year 1976 is $30,150,000 for Indian development. The $30.2 million includes $25 million for public works, $3.7 million for planning, and $1.5 million for technical assistance. No funds are included for business loans because of the enactment of the Indian Financing Act last year. PAGENO="0350" 344 The other question from Senator Domenici related to the excess property. In this area, I immediately went back and received a brief.. ing on the status of our excess property procedures. It was because of some changes in the regulations by GSA that has held up the followthrough by EDA in making excess property available. The question was whether EDA districts were really areas to receive the excess property. This has finally been resolved. We are in the process now of drafting regulations, and hopefully within 2 weeks the excess property will be made available to the people that need it. I would say also that I fully endorse the program and feel that excess property can enhance economic development. Senator MONTOYA. Do you favoi the excess property legislation which made it possible for the regional commissions to undertake a program of a catalytic program of bringing about excess property for State agencies. Mr. MIZELL. We are dealing in EDA with excess property for our grantees. I understand there is a difference between this and surplus property. Senator MONTOYA. No. I am speaking of excess property. I under- stood that there was an attempt being made by the administration to repeal the provision, and is it your position now that you endorse the particular provision? Mr. MIZELL. I do endorse it as it relates to the EDA program, Mr. Chairman, and we hope to make excess property available through our economic development districts. Senator MONTOYA. I had the GSA Administrator in my office last week, and I asked him this specific question. I tried to ascertain whether he had any objection to this provision. He said he didn't. iSo I hope there is unanimity downtown on this provision because there s unanimity here. Mr. MIZELL. Mr. Chairman, I have stated to you what my position is for the EDA program. I am not addressing the regional commissions' program. Of course, if there would be some further directions coming from downtown, then I would have to be in a position to oppose those proposals. But my recommendation is that we reimplement the excess property program make it available to people that need it. Senator MONTOYA. I think you should be more authoritative and more weighty with me and with this committee than 0MB might recommend. Mr. MIZELL. I don't want to touch that, Mr. Chairman. But hopefully, we will have it in place in the next couple of weeks and be able to make the response to the gentleman's inquiry. Senator MONTOYA. If you will bear with me, Senator Stafford is anxious to meet a delegation in his office. He is overdue. So if you will permit us, we will ask him to ask any questions he has now at this point. Senator Stafford. Senator STAFFORD. Thank you, Mr. Chairman, very much. I want to join in the welcome to the Assistant Secretary, Mr. Mizell. I am glad to have him here. I take comfort in the fact that he now occupies the position he does. My question has to do with, frankly, the skiing industry. I am gomg PAGENO="0351" 345 to direct it to the General Counsel, Mr. Harvey, if I may. Mr. Harvey, you may recall that a year ago this winter, the ski industry through the East suffered from lack of snow and later from lack of gasoline, and generally a~ winter disaster struck the entire industry. We had discussions with your office in connection with regulations and with Mr. Michaels concerning it. Those regulations were promised my office about a month ago, regarding the availability of working capital assistance to aid the winter recreation industry when the industry was suffering severe economic reverses because of the situation that I mentioned that occurred last year and could occur again. Later on, the Assistant EDA Secretary Blunt promised that regu- lations in this area would be formulated when he appeared before this committee last November 20; and again subsequently on December 9, Mr. Michaels told my staff that he was working on the regulations. So my question is, what has been done and where are the regula- tions at the present time? Mr. HARVEY. Senator Stafford, regulations have been issued imple- menting title IX. They don't specifically refer to assistance to any particular division of the industry, such as the winter recreation in- dustry, but clearly we understand that it was the intent of Congress, as referenced in the reports, that that was an example of a kind of an industry injury that ought to be eligible for help under title IX of the new amendments to the act. So there is no misunderstanding in that regard. I am advised that perhaps some misunderstanding may have arisen with respect to businessmen in the State of Vermont who may have conferred with our field people about assistance under other sections of the act and that these businesses were not in redevelopment areas and they apparently were told that they would not be eligible. Under title IX, it isn't necessary that a beneficiary be located in a redevelopment area. It extends generally to impacted areas. We have not yet approved any title IX projects. We are just implementing title IX. We do have the regulations and we agree that certainly assistance to an area adversely impacted by seasonal changes in the winter recreation industry would be eligible. Senator STAFFORD. When were the regulations issued, Mr. Harvey? Mr. HARVEY. The regulations were issued in December of 1974. Senator STAFFORD. Could you tell us when the guidelines, if they have been, were sent to the regional offices, the guidelines that you referred to? Mr. HARVEY. I believe guidelines further directing the taking of applications are now being looked at, but have not actually been turned out. They will be in the next few weeks. Senator STAFFORD. You would expect within the next few weeks those would be issued? Mr. HARVEY. Certainly. Senator STAFFORD. Thank you. Thank you, Mr. Chairman. Senator MONTOYA. If the Senator would yield to me at this point, we had a similar situation in New Mexico where some years we will not have snow, and this creates quite a hardship on the local skiing industry. PAGENO="0352" 346 Section 901 of title IX reads as follows: It is the purpose of this title to provide special economic development and adjustment assistance programs to help State and local areas to meet special needs arising from actual or threatened severe unemployment arising from economic dislocation including unemployment arising from actions of the Federal govern- ment and from compliance with environmental requirements which would move economic activities from a locality and economic adjustment problems resulting from severe changes in economic conditions and to encourage cooperative inter- governmental action to prevent or solve economic adjustment problems. Nothing in this Act is intended to replace the efforts of the economic ad just- ment program of the Department of Defense Senator MONTOYA. In view of this, do you agree that when, say, a skiing industry locally suffers because of the weather elements or because of lack of snow that they will be eligible for some kind of assistance to tide them over until the next season? Mr. HARVEY. Senator Montoya, I would say that that was exactly what the Congress had in mind. The adversity of the lack of snow or low temperatures was the exact example that they had. I would think certainly any assistance extended under this section has to be pursuant to a plan. I would say that adversity to that area and the plan to do some- thing about it which is based actually on weather adversity would be eligible for consideration. Senator MONTOYA. How do your new regulations fit by way of implementation into this picture? Mr. HARVEY. *The new regulations rather liberally and broadly follow the statute. They don't define or mention particular industries that are eligible. We certainly do nothing to preclude this. I would say that the regulations give some more specificity than is provided in the statute, but until we gain some experience with it we are not going to draw the line very tightly. Senator MONTOYA. Let me give an example. We have a ski resort area in Taos, N. Mex. Because of EDA providing some money to build a road to the ski run, we built up a very healthy winter economy, whereas before the economy was dormant during the winter months. All of the service industries are in full steam and employment has increased during the winter months. We have a very healthy economy. If we should suffer from lack of snow, naturally the service industries will suffer in the community. So will the ski industry, because they will have to keep some overhead waiting on snow. This is where the economic adversity sets in, in that the overhead goes out and the revenue is down. Do you envision within the law and within the regulations that you have promulgated that you can grant some assistance to the ski industry under those conditions? Mr. HARVEY. Yes. Senator MONTOYA. What about the local businesses in the com- munity which depend on the ski industry? Mr. HARVEY. We are talking about a plan for the area winch would include maybe a variety of assistance to those who are suffering economic adversity which may all be tied to directly or indirectly, let's say, the weather conditions which undermine the success of the winter recreation industry. PAGENO="0353" 347 That doesn't limit assistance directly to industries, people who are directly in the business of running ski slopes. Senator MONTOYA. Will you people prepare a more definitive state- ment with respect to the ski industry for our next hearing when we go into the new legislation? Mr. MIZELL. Mr. Chairman, I don't think there is any reason why we wouldn't have those complete by that time. This is one of the points that I was going to touch on, just briefly, to bring us up to date. Over the past 2 months, our regional directors have been working with our States and our local governments to determine the need for this type of assistance. Because of the unique nature of the program, we will now have to provide our regional directors with definitive guidelines so they can begin to invite applications for planning and adjustment grants. We will have those guidelines completed within a short period of time. I would say a couple of weeks. We will have those completed and in place. I would want to make just one comment on that line of thought, Mr. Chairman. Under the legislation, the request for funding must come from a public entity; this is under title IX. The grant would be made to the public entity which, in turn, could make loans to the businesses or to the areas in the community that would help alleviate the situation. Senator MONTOYA. Some people in your agency are saying the community must be in a redevelopment area when in fact under title IX that is not a requirement. Mr. MIZELL. That is not my understanding, either, Mr. Chairman. It has to be a public entity according to the legislation. It could be a city or it could be the State. I wanted to touch just briefly, Mr. Chairman, on section 302 planning. Several of the members have indicated their interest in this new program. My initial observation since coming on board is that the program is now underway and our regional directors are in contact with the States and the districts and cities regarding the preparation of specific applications. I have with me today, Mr. Joe Hamrick, our Deputy Assistant Secretary for Planning, who can discuss this in more detail, if you wish. The budget for 302 funding for 1975 is $5.5 million for State grants, $1 million for districts, about half of which would be for A-95 review expenses, and $2.5 million for city planning efforts. Senator MONTOYA. You are thinking of 304 instead of 302, aren't you? Mr. MIZELL. No. I was speaking of 302 at that time, Mr. Chairman. Senator MONTOYA. For planning? Mr. MIZELL. The planning funds under 302. The allocations have already been made to the States under 304, which as you well know can be used to supplement programs under titles I, II, and IV of our legislation. Mr. Chairman, that sums up my brief statement on the budget. We would like to try to respond to your questions. 50-194 0 - 75 - 23 PAGENO="0354" 348 Senator MONTOYA. Senator McClure, I understand, has to leave. I will accord him the privilege of asking questions. Senator MCCLURE. Thank you very much, Mr. Chairman. I do appreciate the appearance, your first appearance in this job before this committee. It is always good to see an old colleague in fact up here-even on the other side of the table. Mr. MIZELL. Easy on the old, Jim. It makes my arm hurt when you say that. Senator MCCLURE. OK. I will go easy on it. I have a couple or three questions. Perhaps I will give those and then direct myself to another area. In your prepared statement, you indicate that EDA has been ascertaining the extent of the problem under title IX. Yet, the budget request for fiscal year 1976 shows an increase of over $11 million in title IX, a jump from $38 million to $50 million. Could you tell the committee the basis for the increase, if you are still ascertaining the extent of the problem? Mr. MIZELL. My response to the gentleman would be that this is the anticipated demand under title IX by the cities and by the States, that title IX is directed to try to help. It is anticipated that there will be an increased demand for funding under title IX as awareness of the program increases. Senator MCCLURE. In other words, kind of a "guesstimate" of what you will find when you ascertain the extent of the problem? Mr. MIZELL. I would have to say that it is an estimate. Senator MCCLURE. You also indicate that all States have been informed of their apportionments under section 304. Have the States indicated a capacity and a willingness to utilize those funds? Mr. MIZELL. I am told that we have until March 15 to receive notification from the States that they wish to participate and will accept the funds. We have not received application from all of the States at this time. But we have gotten them from about 10. Senator MCCLURE. You have them from about 10? Mr. MIZELL. Yes, at this time. Senator MCCLURE. Have those States indicated that they are both able and willing to use the funds under section 304? Mr. MIZELL. Yes. Senator MCCLURE. The other 40 have not yet responded? Mr. MIZELL. We may have some more responses at this time. Senator MCCLURE. Do you believe the $13 million, after being divided 50 ways, provides enough incentives for the States to par- ticipate in the program? Mr. MIZELL. I think that it does provide at least an opportunity for the States to utilize these grant moneys to participate in projects with the cities and at the local level, and provides them supplemental funds for projects that otherwise may not be funded under titles I, IIandIV. Senator MCCLURE. $50 million divided up among 50 States isn't very much for any one of the 50 States. If they start dividmg that rn grant programs or in assistance programs into a lot of different locali- ties, it doesn't spread very far. I just wonder if we are going to be able to put together any kmd of an estimate from the States, from all 50 of them, when all 50 have re- PAGENO="0355" 349 sponded to the total demand under this section or whether the States themselves are saying we don't want to go this route, we would rather go some other route. Did you say there was a cutoff date for the receipt of applications in March? Mr. MIZELL. It is March 15, I believe. Senator MCCLURE. Could you provide shortly after that a brief answer concerning the expressed capacity and desire of the States to participate under section 304? Mr. MIZELL. We would be glad to provide that information. [The following information was subsequently supplied:] Of the 55 units of Government contacted, 53 have accepted. Nevada and Guam declined to participate. Senator MCCLURE. The very first page of your statement makes reference to one of the questions that I have discussed with you. For the record, that is with regard to the $125 million that we suc- ceeded in getting appropriated under title X for fiscal 1975, the Presi- dent has requested a supplemental transferring these amounts to the Department of Labor with the intention of redirecting those funds to the emergency public service employment program. As I recall the figures, there was a $1 billion in Public Service Em- ployment under the regular appropriations. There was an additional $875 million to public service employment under the emergency, mak- ing a total of $1,875 million available for the public service employment program. Senator MONTOYA. May I add that there is also quite a big fund out of the revenue sharing which goes to the States and the cities, 80 percent of which can be used for public service jobs under the law. Senator MCCLURE, The $125 million was a very minimal amount in an attempt to see whether we can redirect the spending priorities and whether or not we can indeed create more jobs through the Fed- eral programs and more jobs in a way other than simply public service employment. The Administrator of EPA yesterday before this committee said that they expected $4 billion would be spent in water and sewer treatment in the grants to the cities and localities and that $4 billion would create a total of 80,000 jobs directly. My mathematics told me that was an investment of $50,000 per job. He also indicated that the Bureau of Labor Statistics had esti- mated for every job created directly there would be a job created indirectly, That would be 160,000 jobs and an expenditure of $4 billion. My mathematics again would tell me that that is $25,000 per job. We have evidence now that if this program under title X were implemented, SBA, for instance, says they can create jobs at an average of about $300 per job investment by the Federal Government. I think there are people within your agency, not you yourself, who are looking at labor-intensity programs rather than the job-effective- ness programs and those two terms are not synonymous. I would hope that somewhere, somehow we get through the message that what we were trying to do under this program-under title X- was job-effectiveness of Federal expenditures and not the 1abor~ intensity investment that may be made. PAGENO="0356" 350 I am afraid that even after Congress turns down the President's desire to transfer this money-I am sure Congress will-that the $125 million will then be divided up among the States for them themselves to invest in public works and that is not what that title intended. That title was intended to create an evaluation of the present spending programs to determine which ones were most job effective, not which ones were most labor intensive, in the public spending sector and to see whether or not some of this $125 million that was finally appropriated could be used to supplement other public Federal and non-Federal and private moneys to generate jobs far beyond the $10,000 per job that we have in public service employment or the $25,000 per job that the Bureau of Labor Statistics indicated on these other grants. Somehow we have to get that down to your agency, get it through 0MB that there is an opportunity to create jobs without direct Federal expenditure and payment of salaries which is the least pro- ductive of all of the jobs in the United States as far as I can tell. Would you care to comment? Mr. MIZELL. Yes. I would like to respond and say that as we are working with developing the criteria on which these funds will be allocated to Federal agencies, we recognize that labor intensity was listed fifth. I think that this is significant to the areas where the Congress has placed its priorities. While we think it is something that should be considered, we are not of the opinion that this necessarily should be given the top priority in allocating these funds to the different Federal agencies. I would like to supply for the record at this point, if I might, a summary of the requests that have come in from the different agencies so it might be available for the committee so they can see the broad range of requests that have come in and the employment that they propose to create. It will also give you an idea of the magnitude of our job right now in trying to determine how to allocate these funds to the Federal agencies so that they might put them in place in areas that they think are going to carry out the mandate of the Congress. Senator MCCLURE. Mr. Chairman, I would hope that that can be made a part of the record at this point. Senator MONTOYA. Certainly. [The information referred to follows:] U.S. DEPARTMENT OF COMMERCE-SUMMARY OF TITLE X PROPOSALS (AS OF FEB. 26, 1975) Agency Number of project proposals Total dollar cost Federal dollar cost Estimated man- months of employment Economic Development Administration Regional Commissions (Title V and Appalachia)_ Other Federal Agencies I 6, 186 1, 997 10, 025 $1, 488, 010, 142 453, 391, 767 2, 883, 230, 154 $976, 033, 563 347, 354, 289 1, 748, 406, 934 864, 119 350, 459 1, 926, 901 Grand total 18, 208 4, 824, 632, 063 3, 071, 794, 786 3, 141, 479 I In addition, the ICC has proposed an $11,000,000,000 program for railroad roadbed rehabilitation. Note: The following pages present the proposals in more detail including estimated average labor intensity and average duration of jobs in terms of man-months. PAGENO="0357" 351 EDA REGIONAL OFFICES Number of project proposals Total cost Federal cost Estimated Average Average man-months labor duration of employ- intensity (man ment (percent) months Southwestern regional office: Arkansas Oklahoma New Mexico Louisiana Texas Total Midwestern regional office: - Ohio Wisconsin Iowa Indiana Illinois Michigan Minnesota Total Rocky Mountain regional office: Colorado Iowa Kansas Utah Montana Nebraska North Dakota South Dakota Missouri Total Southeastern regional office: Kentucky Tennessee Florida Alabama Georgia Mississippi North Carolina South Carolina Total Western regional office: California Idaho Washington Nevada Oregon Alaska Arizona Total Atlantic regional office: - New York Pensylvania West Virginia Virginia Maryland Massachusetts Vermont New Hampshire Maine Connecticut Delaware Washington, D.C Rhode Island Total 93 $8, 486, 232 $7, 124, 684 11, 106 74. 3 6. 8 17 5, 912, 500 4, 956, 000 8, 846 81. 0 7. 8 3 555, 000 444, 000 361 69.2 6. 0 74 9, 951, 219 6, 454, 531 18, 947 74. 0 9. 25 84 31,000,003 27,800,258 16,203 41.5 10.0 271 55, 904, 954 46, 779, 473 55, 463 27 15, 253, 425 15, 203, 425 9, 104 81. 0 9. 7 77 15, 337, 805 15, 128, 805 10, 557 75. 0 10. 1 7 1, 110, 700 1, 105, 740 652 76. 0 6.0 69 17,419,756 15,111,165 11,824 61.0 8.3 180 70, 637, 700 63, 622, 936 34, 676 67. 5 6. 8 216 56, 176, 532 39, 610, 961 31, 377 54. 7 7. 5 60 10, 761, 896 8, 510, 056 6, 789 56. 0 7. 1 636 186, 697, 814 158, 293, 088 104, 979 -- 2 620, 000 600, 000 1, 124 67.0 6.0 7 2,407,000 1,375,000 2,312 74.0 9.0 7 2,335,000 1,852,000 1,599 59.0 9.0 16 1,111,000 985,000 1,101 83.0 6.0 11 6,504,000 6,504,000 5,518 72.0 10.5 4 1, 350, 000 1,350, 000 3, 752 75.0 10. 5 25 6,558,500 6,551,800 5,358 62.0 7.0 8 3,952,300 3,952,300 8,208 75.0 11.0 97 11, 672, 000 9, 160, 250 16, 062 77.0 10.0 177 36, 509, 800 32, 330, 350 45, 034 138 14,088,305 11,388,752 14,959 70.1 8.9 472 83, 275, 470 76, 194, 045 72, 287 57. 1 8.5 320 36, 417, 605 30, 983, 245 33, 382 63.0 7.3 258 38, 417, 636 30,088, 154 33, 021 61.6 8. 1 279 38,021,422 36,493,922 34,256 66.7 8.9 212 40, 186, 376 29, 086, 695 34, 162 60.9 8. 5 684 101, 993, 100 65, 344, 624 70, 797 69.8 7.3 559 82, 249, 363 63, 267, 860 92, 368 55. 1 6. 8 2,922 434, 649, 277 342, 847, 197 385, 232 765 233, 076, 473 207, 176, 821 123, 181 62. 5 10.4 64 16, 654, 683 13, 781, 473 15, 933 67. 5 8. 8 329 69, 501, 932 46, 048, 868 24, 510 46. 0 6.2 45 5, 388, 900 5, 388, 900 5, 603 79.0 11.0 188 24, 844, 252 20, 820, 330 14, 362 63.6 8.2 78 10, 358, 076 8, 948, 646 7, 277 66. 5 6.3 7 1, 299, 700 1, 299, 700 268 72. 1 10.9 - 1,476 361,124,016 303,464,738 191,134 169 33, 526, 508 22, 767, 583 24, 166 64. 3 5.7 327 63, 708, 636 29, 918, 092 29, 270 61. 2 9. 3 41 4, 426, 908 4, 139, 176 4, 870 78.8 9.8 54 8, 663, 513 8, 246, 722 8, 169 68.9 9. 0 43 4, 862, 071 4, 425, 052 5, 631 70. 1 8. 6 25 8, 663, 513 7, 329, 840 4, 770 58. 2 6.8 8 11,474,220 11,187,220 1,345 34.6 7.9 5 272, 680 218, 144 263 59.9 5. 1 23 4, 488, 070 1, 997, 338 2, 237 70. 1 5.9 6 2, 015, 000 1, 348, 000 942 64.0 8. 0 1 300,000 275,000 432 83.0 12.0 1 262, 000 216, 450 182 64.9 7. 5 1 250, 000 250, 000 NA NA NA 704 143,124,281 92,318,617 82,277 Totals for EDA regional offices - 6,1861,488,010,142 976,033,563 864,119 PAGENO="0358" 352 REGIONAL COMMISSIONS Estimated Average Number man- Average duration of project months of labor (man' proposals Total cost Federal cost employment intensity months) 1. Upper Great Lakes 95 $36,385,594 $34,660,944 22,795 61.8 10.04 2. Coastal Plains 18 6, 689, 541 6, 578, 381 7, 754 73. 0 9. 4 3. Pacific Northwest 230 23, 914, 915 20, 269, 409 17, 529 63. 7 10. 08 4. New England 33 13, 695, 244 11, 105, 244 9, 189 63. 0 11. 0 5. Four Corners 357 49, 604, 583 41, 064, 893 46, 859 72. 8 9. 0 6. Ozarks 331 55, 159, 843 43, 710, 386 66, 665 72. 0 8. 6 7. Appalachian 830 245, 955, 386 167, 985, 071 160, 581 71. 3 9. 5 8. Old West 103 21, 986, 661 21, 979, 961 19, 087 67. 9 7. 7 Totals for regional commissions. 1, 997 453, 391, 767 347, 354, 289 350, 459 OTHER FEDERAL AGENCIES Estimated Average Number man- Average duration of project months of labor (man- Name proposals Total cost Federal cost employment intensity months) 1. Federal Energy Administra- tion 8 $50, 160, 048 $34, 806, 201 29, 700 43. 0 11. 6 2. National Science Founda- tion 8 15, 528, 647 7, 835, 682 8, 363 48. 0 12. 3 3. Department of Housing and Urban Development 205 50, 000, 000 50, 000, 000 73, 800 83. 6 12. 0 4. Department of Commerce- Maritime Administration... 4 4, 627, 500 4, 627, 500 36, 957 93. 0 10. 0 5. American Revolution Bi- centennial Administration. 19 41, 206, 700 33, 727, 700 42, 207 NA NA 6. General Services Adminis- tration 10 117, 970, 000 117, 970, 000 79, 533 68. 0 8. 2 7. National Aeronautics and Space Administration - 64 39, 753, 000 36, 728, 000 12, 247 53. 0 8. 9 8. Veterans Administration...~_ - 15 63, 233, 400 63, 233, 400 27, 223 62. 8 13. 2 9. Environmental Protection Administration (nation- wide recruitment) 1 15, 500, 000 15, 500, 000 36, 000 91. 0 12. 0 10. National Endowment of the Arts 36 76,105,728 54,814,714 84,227 66.0 10.7 ii. Federal Trade Commission. 3 749,332 749,332 635 95.0 15.0 12. National Endowment for Humanities (nationwide recruitment) 1 4, 250, 000 4, 250, 000 4, 800 94. 0 12. 0 13. Small Business Administra- tion (SBA) operating pro- grams) 5 113, 053, 820 113, 053, 820 397, 800 NA 12 14. Interstate Commerce Com- mission (rehabilitate rail- road roadbeds) (1) (11, 000, 000, 000) (11, 000, 000, 000) NA NA NA 15. Postal Service 16. Department of Commerce- DIBA 17. U.S. Civil Service Commis- sion 0 18. Federal Communications Commission 0 19. Department of Treasury. - -- 0 20. Securities and Exchange Commission 0 21. Federal Maritime Commis- sion 0 22. Department of Labor 0 23. Corps of Engineers 2, 678 137, 845, 800 137, 845, 800 137, 660 80. 6 12 24. Department of Defense 1 1, 065, 000, 000 NA NA NA NA 25. Department of Agriculture.. 6, 271 570, 880, 358 566, 692, 858 638, 828 78. 0 12-24 PAGENO="0359" 353 OTHER FEDERAL AGENCIES-Continued Estimated Average Number of man-months Average duration project of employ- labor (man- proposals Total cost Federal cost ment intensity months) 26. Department of Interior: Bureau of Indian Af- fairs 275 36, 961, 321 26, 788, 821 27, 291 70. 2 6.2 Geological Survey 12 13, 149, 000 13, 149, 000 17, 303 85. 2 7.7 Bureau of Mines 13 786, 068 786, 068 953 100. 0 14. 0 Bureau of Land Man- agement 91 16,128,445 16,126,445 9,527 68.7 5.9 National Park Service~ 109 40,471,600 40,471,600 24,019 71.1 3.6 Fish and Wildlife Serv- ice 1 1, 300, 000 1, 300, 000 743 42. 0 24. 0 Bonneville Power Ad- ministration 2 600, 000 600, 000 294 62. 5 7. 0 Outdoor Recreation_ _ 2 125, 000, 000 125, 000, 000 NA NA NA Total for Department of Interior 505 234, 396, 434 224, 221, 934 80, 130 27. Energy Research and De- velopment Administra- tion 23 33,814,000 33,814,000 28,212 NA 12.0 28. Water Resources Council___ 0 29. Department of Transporta- tion 79 70, 520, 029 70, 438, 154 40, 994 67. 5 9. 2 30. Tennessee Valley Authority- 26 14, 321, 900 13, 783, 660 13, 913 72. 0 8.6 31. Department of Health, Edu- cation, and Welfare 63 164, 314, 179 164, 314, 179 75, 542 80.0 10.0 32. National Academy of Science 0 ________________________________________ Totals for other Federal agencies 10, 025 2, 883, 230, 154 1, 748, 406, 934 1, 926, 901 Senator MCCLURE. The kind of thing that I am afraid is being over- looked is the opportunity to use these $125 million in funds as supple- meņts to other Federal or State expenditures that would then be more effective in terms of that Federal investment in the creation of jobs in target areas. An example has been used of a city that with matching funds was about to build a runway extension, but because of the inflation, the available money under their bond issue and matching grants, falls a few dol]ars short of being able to get that contract authorized. A few dollars grant from this to supplement the other in terms of the money spent in this program would be very effective in creating jobs and immediately because of projects ready to go. Another example out in my own State, although it is not an area of critical unemployment and I hope it doesn't become that, two different operators wish to go in and start a mining operation which will produce something that is very badly needed by the Nation today, and that is fertilizer for the farmers to produce more food so we can feed our people and others and they can't start that operation because an environ- mental impact statement has to be filed first. It is just possible that with a few dollars more to get some more personnel into the Forest Service to make that environment impact statement we could then release the investment of hundreds of mil- lions of dollars in the private sector almost immediately and that expenditure of money under this program would then be very, very job effective indeed. PAGENO="0360" 354 Somehow we have to get through that that possibility exists, and that is the reason this title is in title X. Mr. MIZELL. I think that the Secretary of Commerce is well aware of what the intent of this committee and the intent of the Congress and the gentleman from Idaho intended title X to be used for, and that was to provide meaningful jobs that will leave something after the job is completed while at the same time provide jobs for the people. Senator MCCLURE. I am sure the Secretary is aware because I talked to him about it personally. So I know he has at least heard it. But about the time he gets aware, he leaves. You just got there. I hope you will be there for awhile. That is the reason I bring it up today. Mr. MIZELL. I see this clearly as the intent of title X. Senator MCCLURE. Thank you very much. I hope you not only see it clearly, but express it clearly, not only within your own agency but also with 0MB. Mr. M1ZELL. At every opportunity, I can assure the gentleman. Senator MCCLURE. Thank you very much. That is the oniy thing I can ask of you at this time. Senator MONTOYA. Senator Randolph, do you want to ask some questions? The CHAIRMAN. Mr. Chairman, has Mr. Hart had an opportunity? Senator HART. Thank you. I do have to preside at 12. The CHAIRMAN. Senator Hart. Senator HART. Thank you, Mr. Chairman. Mr. Secretary, I would wager that everybody in the Senate today, in the House-conservative, liberal, Democrat, or Republican-cam- paigned on the grounds that they were going to come to Washington and do what they could to reduce waste in the Government, cut back on Government expenditures and so forth. I think genuinely that is the point that the people of this country want. What I know of your political background you have been pretty strong in these kinds of things as well. You are here this morning asking roughly for one-third of a billion dollars. The two questions I have are: One, what steps you intend to take to reduce waste in your agency? I realize this is a philosophical administrative kind of question. Second, what advice would you have for us in observing your operations on a day-to-day basis other than this hearing here today to try to get a handle on the effectiveness of the dollars being spent, these one-third of a billion dollars? What I have trouble with in your statement is finding out what really has been the effectiveness. How many jobs have been created? What has been the economic stimulation of your agency in the past year? I know that that is not your personal responsibility. But a year from now it will have been. I guess I am just looking for some guideposts to guarantee that with this one-third of a billion dollars, will we be getting our money's worth? I have heard talk about various titles here this morning and whether this approach is better than that approach. But I get very little tangible feeling about what the effectiveness of this entire operation is. Mr. MIZELL. I can certainly appreciate the position of the gentle- man from Colorado. Having worked with this program in the House of PAGENO="0361" 355 Representatives and on the committee, I think it is one Government program that probably gets as much results for the dollars spent as any that I have been associated with. I think probably the success of this program is because it involves the local communities, it involves the grassroots people, and it en- courages them to develop some plans that are going to develop their community and it is going to help them. It is encouraging the people to do something for themselves. The amount of money that we put into these communities most of the time is very small in comparison to the overall capital that is attracted to the community to provide job opportunities and services for the people that helps them revitalize their community. Because of this sturcture, I think this is one of the reasons for the good track record, in getting results for the dollars it does spend. So when I come with this budget of $314 million, I am really happy that EDA has a budget this year. We have come through a period of time when efforts were made to shift from this approach to economic development. So I come fully convinced that these dollars are going to be spent not only where you get a dollar's worth, but where there will be a multiplier effect. So from this standpoint I have always strongly supported this program. Senator HART. I think it would be helpful if you could supply me with, say, three case studies of projects at the local level that have worked and what the impact they have had is. It would be helpful, I think, for people like myself. Mr. MIZELL. I would really like to supply to the gentleman any number of examples that will give him a real good insight into what EDA has been doing and what it is doing now. Senator HART. I would appreciate it. Thank you very much. Senator MONTOYA. Senator Randolph? The CHAIRMAN. Thank you, Mr. Chairman. I ask to be forgiven. That man is here with his thermometer again. Yesterday morning I called attention to the fact that this room had a temperature of 78°. We are making some progress, even if slowly. It is 76 today. I just want to continue to call attention to the drop hoping that it will be brought down to 70 in the near future. Mr. MIZELL. Senator Randolph, sitting in this seat it doesn't feel like the temperature has dropped at all. If I might- The CHAIRMAN. You mean you refer to it as the hot seat? Mr. MIZELL. It is a little warm this morning. The CHAIRMAN. I thought the questions were strictly valid, that there was no emotion in them. Mr. MIZELL. They are always good questions coming from this committee, Mr. Chairman. The CHAIRMAN. By the way, about questions, how did you get the name Vinegar Bend? Mr. MIZELL. Because I had a first name like Wilmer and hailed from the little town of Vinegar Bend, Ala., population, 37, and went into baseball. They had to find something to call me besides Wilmer. So they hung the title on me of Vinegar Bend. PAGENO="0362" 356 Senator M0NT0YA. What do they call you since you came to Congress? Mr. MIZELL. They call me a lot of things, Mr. Chairman. The CHAIRMAN. Vinegar Bend, I remember you were with the Cardinals. Forget the Pirates for a moment. Mr. MIZELL. I didn't know you were old enough to remember those days. The CHAIRMAN. I know you will not throw us any spitballs. You may put some curves in. I want not to be facetious this morning in my earlier comments about temperature. We have not yet come to grips with the fact of how much we can save in energy through voluntary action. Is that right? Mr. MIZELL. That is true. The CHAIRMAN. You would agree. Mr. MIZELL. That is true. The CHAIRMAN. The state of the art of baseball has dropped con- siderably since you left. Will you agree to that? Mr. MIZELL. Yes, sir. The CHAIRMAN. So that is the two points on which we have agree- ment. I want to reinforce, Mr. Chairman, what Senator McClure said. He was talking about section 304 which has to do with supplemental funds. A $13 million apportionment from an available $150 million or $50 million? Which is it? Mr. MIZELL. The authorization is $35 million for 1975. The CHAIRMAN. $35 million. We had hoped to have a bigger one, but we are talking about $15 million now. $13 million of $15 million I think is minuscule when we attempt to understand what I call the tremendous need for more jobs and also for long-term economic growth. Let's take now West Virginia, which does very well and someone would say why should I then talk about Maryland or Maine, but Maine is $67,000 and Maryland is $48,000. What are you going to do with those amounts in States like Maine and Maryland? Mr. MIZELL. Under the 304 title, of course this is a new approach and it is a new direction, Mr. Chairman. As these levels were set, our responsibility was to try to put them as equally and as fairly as we could to the States so that they might use them as supplemental funds in the areas of title I public works, or title II or Title IV. So I think it would be presumptuous on my part to try to say how much good they would be able to do with these since they could use them in such a wide range of different ways. The CHAIRMAN. Mr. Mizell, I think that it would be better almost not to apportion any funds in such amounts. Someone would say keep silent, Mr. Randolph, don't talk about West Virginia. Here is $490,000 in this apportionment and we can do something with that money. But how any apportionment for fiscal 1975 under section 304 could give to the State of Maryland $48,000, I would like for you to explain it. Mr. MIZELL. I think that the greatest way that they could help is probably in the area where you have a project that is able to get PAGENO="0363" 357 partial funding from another source, but yet they could move in with some additional funds and help them put the project in place. In this way you would get a multiplier effect from these funds. You would be also involving the States in development of different proj ects. The CHAIRMAN. Mr. Chairman while we are thinking about $13 million, from $35 million, can you get that across to us? Senator MONTOYA. From $13 million to $35 million? The CHAIRMAN. Yes. $13 million. Senator MONTOYA. The authorization in the legislation provided for $35 million for this year. The CHAIRMAN. Fiscal 1975. Senator MONTOYA. And $75 million for the next fiscal year, 1976. The administration last year asked for $13 million. That is what the Congress appropriated for this current fiscal year. Now they are asking for $20 million which is far below the authorization-the authorization as it was-and if you will remember, we cut it down considerably from what we had in mind in order to comply with the President's expectations and have him sign the bill. The CHAIRMAN. That is right. Senator MONTOYA. After he vetoed it. The CHAIRMAN. That is right. Senator MONTOYA. So it is still very minuscule even with the authorization at the present level. The CHAIRMAN. You voted to override the veto, as I recall. Mr. MIZELL. Yes. The CHAIRMAN. Do we have a personnel problem? Is that involved here? Senator MONTOYA. I asked that question at the confirmation hearing, if you will remember. The CHAIRMAN. I do recall that. Yes. You haven't had a responsibility and I believe you said you didn't have enough personnel. Isn't that right? Mr. MIZELL. I don't recall making that specific statement. Senator MONTOYA. The point I was making, Mr. Chairman, because of the year limitation on the authorizing legislation, that the EDA people were going out into other agencies and seeking more permanency in their employment and more assurance and of greater permanency, I should say. The CHAIRMAN. Yes. You certainly clarified that. Mr. MIZELL. Mr. Chairman, in the fiscal 1975 budget we have 650 permanent employees and 73 temporary. We are asking for 88 additional permanent employees for EDA in the proposed budget that is before us for fiscal 1976. Some of these are because we picked up the Trade Adjustment Act; this is 25, and we are requesting secretaries for ED IR's in the field. These two areas cover most of the 88. The CHAIRMAN. I think it can lead us, Mr. Mizell, to a suggestion that I had, because I feel that the Congress should approve more money for an expanded economic development program. I think that this is something that is built upon fact. If that is true, and we do that, if Congress so acts, what, in your thinking, Mr. Mizell, can lead us to believe that the local develop- mental district levels can utilize to advantage this increased obligation? PAGENO="0364" 358 Mr. MIZELL. For personnel or for the total appropriations? The CHAIRMAN. Total appropriations. Mr. MIZELL. I think that with our additional request for personnel, if we are able to pick these up, that we would be able to handle an increase in the budget without having to have any additional personnel over and above what we have requested, Mr. Chairman. I think that we could utilize it. At just what level I certainly wouldn't be prepared to say. The CHAIRMAN. Do you think we could think in terms of perhaps a revision of the current business loan program into a loan guarantee program? Is that advisable? Is there any validity in that suggestion? Mr. MIZELL. I am advised, Mr. Chairman, that we can make those loan guarantees now under the fiexibiliy that you have given us. The CHAIRMAN. What would you say would be the total resources available to business, the type businesses that would need help under such a revised program as you indicate you now have the authority to use? Mr. MIZELL. Mr. Chairman, we don't have a total figure that we can present. The CHAIRMAN. That is understandable. Perhaps later. Mr. MIZELL. There are so many varying needs. The CHAIRMAN. I read your statement, Mr. Mizell, and I thought it was very comprehensive. I believe you bring to this job a commit- ment you understood in Congress and I think now you are going to help us with the position you hold in the executive branch. You stated that 18,000-is that the figure-projects were available with 3 million man-months or woman-months, I will add, of em- ployment, have been submitted for you to review. Is that right? Mr. MIZELL. That is true. This is the survey taken under title X by the 44 Federal agencies. We have also gotten permission to include those requests that have come in from the agencies. It has been granted, to be included in the record. The CHAIRMAN. In terms of title X for a moment, when do you think you could recommend funding certain amounts of money? Mr. MIZELL. We will be ready by March 16 to make the allocation to the agencies should this money be available to us. The CHAIRMAN. How many jobs do you believe, Mr. Mizell, that might create? I am necessarily talking in generalities, but I think that with the recession and unemployment we have to project some- thing even though our figures could be revised at a later date. I am not trying to draw you into a tight figure. Mr. MIZELL. I understand. Because these requests come in from the other agencies, our responsibility as we see it is determining the allocation to those agencies. Then they would be permitted to fund those projects that they think are the highest priority with certain guidelines that we hope to give to them. Until we would have that in place it would be difficult for us, in fact, we probably would have to get this information from the dif- ferent Federal agencies. We would hope that they would furnish us this information so that we would know exactly what we have been able to accomplish with this program. The CHAIRMAN. Do you think, Mr. Mizell, that generally the administration-and I am going to add the Congress, because I PAGENO="0365" 359 don't want to have any polarization or pointing the finger at the executive or the legislative-do you think that government itself at the Federal level and, of course, at other levels, understands the full implications of the creativity and the resourcefulness that must be brought into being now if we are to take care of a downward spiral which it is, even at the moment we talk affecting the economy of the United States? Mr. MIZELL. I certainly don't feel that those who have not been involved with an agency like EDA and what it can do and the role that it can play in this area really realize the potential that we have here to play this role. They may not completely grasp the magnitude of the problem that is out there that we are trying to deal with. I think I would agree with your statement. The CHAIRMAN. You are for placing a person in a job when that person is physically able and mentally able, and that the job be not just the so-called public service job, but increasingly the effort in public works jobs. We want to place people in employment so that there is another job created and another job created and then within the community there is a project which stands as a lasting benefit for the people who live there? Is that true? Mr. MIZELL. That is true, Mr. Chairman, and I say that. But I would also like to add that during the acute situation we are in, maybe we need a public service type of program to complement. I have never been one that really strongly favored such an approach. But with an acute situation we are dealing with, I think we have got to have dif- ferent approaches in order to have the total impact that we would like to have on the unemployment situation. The CHAIRMAN. I voted for the public service program. But I am' grounded in the philosophy that the other program is a better program if we can do it and make it work. I think people who do not know are of a younger generation under- standably than am I, but people look back and they say WPA was a leaf-raking project. That is not true. WPA was a works project. People were doing all sorts of jobs. Frankly, the person who couldn't work on the building of a bridge or a lake or a road or a building or a street or whatnot, that person was writing the history of his county. People who were artists were depicting through their artistry the areas in which they lived. It was a work job in a hundred ways. So I like to say, because I know, that WPA was not leaf-raking. It was a productive program, people at work, whatever that work might have been. I want that, Mr. Chairman, to be on the record, because I think today we are inclined to go back and say we don't want another WPA. WPA, with any imperfections that it had, it was built upon what? The application of a person with their talents, whatever they might be, to the doing of a job. Do you agree that that is so from a study, if you have made it, of WPA? Mr. MIZELL. I haven't made a study of WPA as such, Mr. Chair- man. But going back to my boyhood days and I say Vmegar Bend really I didn't come from right uptown. It was under the public works program that the roads were built out to where we lived. The bridges PAGENO="0366" 360 and the court house at the county seat were also built under this pro- gram that you referred to. So it was a work program. I think that, if we can deal with the un- employment situation and provide meaningful employment that is going to leave something when the program is over, that we should utilize it; and I think that is what we are talking about here this morning. The CHAIRMAN. Thank you, Mr. Mizell. I don't want the record to show a pleasantry, but, I think, we have confidence in you, which I believe I express for many members of the committee, as you move into this important work. There is an opportunity here, a responsibility, and if we can work together in a partnership, make the economic programs of our country better and, cover a wider group of people and leave something con- structive in the community and in the States, we want to do that. Thank you very much. Mr. MIZELL. Mr. Chairman, if I might, earlier I mentioned the information that you had asked from me in a letter. I will be submit- ting that to you. The CHAIRMAN. Fine. Thank you. [The information follows:] U.S. DEPARTMENT OP COMMERCE, OFFICE OF THE SECRETARY, Washington, D.C., March 27, 1975. Hon JENNINGS RANDOLPH, Chairman, Committee on Public Works, U.S. Senate, Washington, D.C. DEAR MR. CHAIRMAN~ This will respond to your letter of March 5 enclosing three questions which you had proposed to ask during the hearing on March 4. I appreciate your including our prepared remarks in the record of the hearing. "What will be the Administration recommendation regarding continuation of the Title V Commissions?" The Administration is developing proposals to be submitted to the Congress by May 15 with respect to economic assistance legislation. The regional commis- sion program is part of this review. At this time the process is not sufficiently advanced for me to predict the outcome of the discussions which we are now having with regard to the regional commission program. In the light of my response to the above question I would like to give my per- sonal views on the other two questions. "What should be the primary mission of the Title V Regional Commissions- planning, evaluation, and technical assistance, including demonstration project authority, or public works grant authority on a supplemental or direct basis?" I believe that over the longer term the more fruitful area for the Title V regional commissions lies in the planning, evaluation and technical assistance field. Al- though Government at all levels influences economic development through public investments, neither local nor State develop-programs can be wholly successful when the underlying problems are endemic beyond their borders and efforts to overcome them are piecemeal or addressed only to a portion of the problem. Individual local and State programs often do not deal effectively with problems which are common among several States in a particular region. The development of strategies for public investment and the coordination of such investments are necessary if local, State and Federal efforts are to be effective and complementary, rather than competitive. The technical assistance authority of the regional com- missions is designed to meet this kind of planning and coordinative need. On the other hand, the supplemental grant authority contained in section 509 is the only instrument currently available to the commissions and their member States for carrying out commission strategies and objectives. The States would be reluctant to see this authority circumscribed without being replaced with other effective authority to implement planning and to coordinate decisions. "How would the Administration view a demonstration program designed to PAGENO="0367" 361 solve or partially solve some of our ongoing problems (particularly energy), such as a supplemental grant program to continue existing energy feasibility studies or loan guarantees to private enterprise for completion of facilities to demonstrate feasibility of new energy sources?" The supplemental grant authority of the Title V regional commissions is limited to public works projects and is not applicable to feasibility or other studies. Neither have the commissions statutory authorization for loan guarantees. They do, however, use their technical assistance authority under section 505(a) (2) of the Public Works and Economic Development Act for feasibility studies and have supported a number of studies related to energy requirements within a region and the socio-economic impacts and problems resulting from energy development or energy shortages. The New England Regional Commission, for example, has been supporting through the States and Federal agencies a major energy study for the New England region. The Old West Commission has been working with the states and communities in its region to cope with the problems created by large-scale development of coal resources in its region. Similarly, the Four Corners Commission has been assisting its states and communities in dealing with coal, oil and gas developments, and the Coastal Plains Commission, working with its three states, has recently completed a feasibility study of deep- water port facilities serving the Southeastern United States. These illustrations are cited as examples of the energy-related technical assistance projects which the Commissions have had underway. Unless changes were made in the statutory authority of the regional commissions, the Administration would continue to support such activities by the Commissions. Sincerely, (S) Dan Garbern DANIEL GARBERN, Special Assistant to the Secretary for Regional Economic Coordination. Senator MONTOYA. In view of the pending applications and in view of the 8.2 percent unemployment and the anticipation of more un- employment in this country, how can we say to the country and to its people that a budget for economic development of $314 million is adequate when the President, in turn, is asking for $1 billion to be thrown away in that region of Indochina? I can't comprehend the paradox. I really can't. I am hopeful, Mr. Secretary, that you will use your good offices, your compassion, your understanding with the people downtown in the hopes that we can develop a meaningful partnership so that we can come out of this committee with some very proper and very timely authorizing legis- lation to take care of our economic needs in this country in the near future. Mr. MIZELL. We are certainly looking forward to working with you, and with the committee, and hopefully in a cooperative way. Senator MONTOYA. I am not trying to be critical in my statement. I am just expressing my hope and expectation that we will find more sympathy downtown because we in the Congress are really sold on this approach. I am sorry to say that the economists downtown are not in sym- pathy with our approach here, but we deal here with concerns for human beings. Some of those economists downtown deal with fiscal gyrations. I think that is the difference. So I certainly want to thank you and wish you well in your adminis- tration. We look forward to working with you and your associates. Mr. MIZELL. Thank you very much, Mr. Chairman. Senator MONTOYA. In view of the lateness of the hour, the fact that we had programed this hearing just this morning, I regret that I PAGENO="0368" 362 have to do this, but I will submit for inclusion in the record the filed statements of all of the other witnesses that are to appear. I want to express my regrets to them that I am not able to go into the hearing process and ask questions. But we will submit questions to EDA and these witnesses will no doubt return to this committee for hearings on the authorizing legislation. Then I will ask them more questions with respect to their thinking and their regions. [Whereupon the hearing was recessed to reconvene 10 a.m. Wednes- day March 5, 1975.] [Mr. Mizell's prepared statement, the additional questions referred to by Senator Montoya, and the statements of the accompanying witnesses follow:] QUESTIONS PROM SENATOR MONTOYA Question 1. Have you begun to make projections of your programs into future years? Is there a place for an economic development agency, say 5 years from now? If so, what will it be like, in your planning for it? Answer. In response to the requirements of the Budget Reform Act of 1974 we are in the process of preparing legislation to continue economic assistance pro- grams beyond fiscal year 1976 when the present authorizations expire. This process is not sufficiently advanced to permit comment on the nature of assistance programs in the future. As part of the budget process for fiscal 1976, projections have been made for the period fiscal year 1977 through fiscal 1980. The estimate of budget authority for each year, for EDA and the Title V Regional Commissions is $371 million, a slight increase above the amount requested for fiscal 1976. As stated in the budget, these estimates, "indicate the degree to which re- sources would be committed by the continuation of existing and currently pro- posed program." The projections ~tated in the budget are not forecasts nor are they recom- mendations since the budget process is subject to continuous review. Question 2. Are you asking any new budget authority for fiscal year 1976 that you did not ask for in 1975? Answer. We are requesting total budget authority of $314,271,000 for fiscal year 1976 compared to appropriations of $269,850,000 for fiscal year 1975 (not including the Job Opportunities Program). The requested increase is $44,421,000. This increase reflects increased funding for new authorities provided during fiscal year 1975. For example, a $7,000,000 increase is being requested for section 304 which provides grants to states for supplemental and basic funding of Titles I, II and IV activities. An increase of $26,250,000 is being requested for Title IX. In estimating fiscal year 1976 funding requirements for this program, which pro- vides flexible assistance to communities to help them combat actual or threatened chronic unemployment, the needs of communities stricken by natural disasters or requiring assistance to adjust to the adverse impacts of increased foreign compe- tition were considered. Question 3. What do you and your people see as the greatest unmet need in the next few years that EDA programs might reach? Answer. Our existing authorizing legislation provides a broad range of program tools. In our judgment, practically any economic development need in economi- cally distressed areas of the country could be met by utilizing current programs. Question 4. Does 0MB set its ceiling within which you must prepare your budget estimates on an earlier projection of agency plans and programs for the future? In other words, do you give 0MB some program parameters before they give back to the Department budget ceilings? Answer. Each spring the 0MB, after consultation with the President, provides guidance to the agencies regarding the approximate total level of funding that is likely to be possible for each agency for the coming budget year. PAGENO="0369" 363 These target estimates are provided only for the Department as a whole, rather than for individual programs within the Department. The agency is permitted to propose program levels which are in excess of the initial target amounts. Question 5. Economic Development Districts play a significant role in the delivery of EDA and other programs. Many groups of counties would like to become EDD's and are eligible. Yet you ask for no new money for new districts? Only a few million would buy a lot of action. Why? Answer. The district program is one very important element in EDA's muti- faceted approach to providing economic development assistance. One criticism that has been raised regarding the district program is that it could tend to en- courage a thin dispersal of available resources. To prevent this, no funds are requested for new districts in fiscal year 1976. This will enable EDA to more effectively concentrate the available resources on existing districts. As I have noted, however, the district program is only one element in our total program and areas not presently in districts could receive assistance from other EDA programs. Question 6. Do you see any change in future directions now that EDA has a great deal more urban places eligible for assistance, together with the fact that more and flexible tools were provided last year to meet an urban needs? Answers. The new legislation enacted last year does improve EDA's ability to assist urban areas suffering from probThms of chronic unemployment. The in- creased number of urban areas eligible for such assistance can benefit from the flexibility offered by these new tools. As in the past, however, the allocation of funds to distressed areas, urban or otherwise, will be made on the basis of a careful analysis of the needs and potentials of specific areas rather than any arbitrary allocation of funds to one type of area or another. PAGENO="0370" 364 DEPARTMENT OF COMMERCE STATEMENT BY ASSISTANT SECRETARY-DESIGNATE FOR ECONOMIC DEVELOPMENT MR. WILMER D. MIZELL, SR. BEFORE THE SENATE PUBLIC WORKS COMMITTEE MARCH 4, 1975 Mr. Chairman and Members of the Committee. * I am pleased to appear before you today to explain the fiscal year 1976 budget request for the programs of the Economic Development Administration. I would like to first outline the request and then respond to the questions * raised in your telegram and also address certain areas which your staff discussed with us subsequent to the telegram. The total request for the Economic Development Administratio~ * for fiscal year 1976 is $314,271,000 in budget authority. Out- lays areestimated to be $259,585,000 for fiscal 1976, much of which are for disbursements of prior year obligations. The budget authority request is $44,421,000 above the fiscal 1975 appropriated level, exclusive of the Job Opportunities Program. As you know, $125 million was appropriated for this special Title X program in fiscal 1975, but the President has requested a supplemental transferring these amounts to the Department of Labor with the intention of redirecting those funds to the emergency public service employment program. * The Budget. also requests funding for the Transition" periOd, July 1 to September 30, 1976; these funds would not be available until the completion of the normaitwelve month * fiscal year. We will require an additional. $72,550,000 in PAGENO="0371" 365 * -2- program funds and $6,093,000 for administrative support during this period. Our budget request includes $290,000,000 for the follow- ing programs: O Public works and business development will require * a total funding level of $176,000,000. Of this * amount we anticipate localcommunity needs for public works funds from this program of $124 million. * This is $32 million less than the current level, but expenditures for traditional public works only represents a portion of total public works * activities funded by EDA under Section 304 and. Title IX also will be used in part for public works. This requested increase is composed of $18,000,000 for ongoing programs and $17,000,000 related to Trade adjustment. o We are requesting $18,500,000 for Planning; this is an increase of $6,300,000 above the fiscal 1975 level. The increase is required to support District and Area planning.through June 30, 1976; these grantees are being supported in fiscal 1975 with funds appropriated in fiscal 1974. 0 The amount requested for Technical Assistance is $10,000,000; this is net increase of $700,000 over the fiscal 1975 appropriated level consisting of PAGENO="0372" 366 3 - an increase of $3,000,000 for Trade adjustment assistance to firms, offset by a decrease of $2,300, 000 to traditional technical assistance :programs. o We prOpose a continuation of the Research program at the fiscal 1975 level of $500,000. o The Grants to States program, authorized by Section 304 of the Act, is proposed to be funded at a level of $20,000,000, *an increase of $7,000,000 above the current level. This reflects an expected increased ability of the States to utilize additional funds during the second year of operation to supple- ment or make basic grants and loans which comply. with the provisions of Titles I, II, and IV of the * Act. * o We are requesting $65,000,000 for Economic adjustment programs; this is an increase of $26,250,000 above - the amount appropriated for the current year. These funds provide adjustment assistance to States and localities to help them alleviate problems of actual or threatened long-term unemployment. Funds may also * be used to assist areas stricken by natural disasters. It is estimated that $15 million of funds mado available under this program will be used for Trade PAGENO="0373" 367 -.4 - adjustment assistance to communities adversely impacted by increases in imports. - In addition to the $290,000,000 for direct programs, we are requesting $24,271,000 for administrative support; this is $1,371,000 above the fiscal 1975 appropriated level. The increase will support an additional 98 positions; this increase in manpower is required for three major reasons: (1) the addition of the Trade adjustment programs to EDA's responsibilities; (2) the need to provide full support for programs initiated as a result of supplemental appropri- ations in fiscal 1975; and (3) to provide clerical support for our Economic Development Representatives. This increase would bring the end-of-year employment up to 738 which is still considerably less than the 870 we had on board on June 30, 1972. Specific Questions and Requested Information I would like to now address the several questions raised in your February 7 telegram and the information subsequently requested by your staff. 1. EDA budget requests -- Your telegram asked for the amount of funds we requested of the Office of Management and Budget (0MB) for fiscal year 1976 PAGENO="0374" 368 -.5- and your staff has asked that I also report on the amounts we requested of the Secretary of Commerce. Our budget request to the Secretary of Commerce last July which was substantially consistent with the programs which were to be subsequently enacted by P.L. 93-423 on September 27, 1974 was $334,600,000. The Secretary of Commerce ultimately sent a request to the 0MB in the amount of $290,850,000, of which $266,500,000 was for program and $24,350,000 for administrative support. This did not include any consideration of the Trade Act programs. The President's budget does reflect assistance to firms and communities adversely affected by increases in imports. The total amount contained in the President's Budget is $23,421,000 above our initial request. You also asked for the rationale behind our budget request. One of the basic considerations in the formulation of our budget request and in the program that has not been presented, is that some of the kinds of activities traditionally administered direct'y by EDA as federally managed programs, could be more effectively carried out by delegating as much decision making authority as possible to the States and localities. The supplemental appropriation for fiscal year 1975 was a step in this direction. It provided funds for expanded planning programs at the State and local levels; for a program of Grants to States through which they can supplement existing PAGENO="0375" 369 - 6 - projects or can approve new projects which meet the basic criteria of Titles I, II, or IV of the Public Works and Economic Development Act. All of these programs will be continued, in fiscal 1976. 2. Optimum level of spending (program expansion! reduction)- Although there has been some thought within the the Agency in the past as to what would be the optimum level for EDA's programs, as you can see from our earlier response to budget request levels we did not consider significantly higher levels of funding for fiscal 1976 since we recognize that there are too many variables to be considered to finding a solution to the Nation's economic problems. For example, it is not reasonable to assume that this program, even if supported by unlimited funding, could counteract all the various factors which influence national economic trends. Our programs have been and must continue to be focused at problems primarily local in nature to foster long range economic development. We can, of course, point to the effective job the agency has done over the past 10 years, and there will continue to be a need for the kinds of specific programs conducted by EDA. I feel that the level of funding requested will produce very concrete improvements in local economies; it is a program level which can be managed effectively. PAGENO="0376" 370 -7- As you know, in accordance with the Congressional Budget and Impoundment Act of 1974, the President in his Budget for fiscal 1976 presented budget projections for each of the fiscal years 1976 through 1980 and for the 3-month transition quarter between fiscal years 1976 and 1977. These projectiOns of budget authority and outlays are intended to indicate the degree to which resources would be committed by the continuation of existing and currently proposed programs at the program levels recommended for fiscal 1976. The estimates of budget authority for each of the fiscal years 1977 through 1980 for EDA and, the Title V: Regional Commissions is projected at $371-million per year. This conpares to.the $365 million requested for fiscal year 1976 for EDA and Title V Regional Commission programs. Outlays estimates are 1977, $378 million; 1978, $359 million, 1979, $351 milliOn; and 1980, $350.1 million. - 3. Budget impoundments - For fiscal 1975, there are two rescissions pending in Congress with respect to the EDA program. o A rescission of $2 million of the $9.3 million initially allocated for technical assistance has - been proposed. - o A deferral of the entire $125 million. appropriated for the Job Opportunities Program with the intention 50-194 685 . - PAGENO="0377" 371 -8- of proposing its use for public service employment assistance. The Comptroller General has now ruled that the Congress should consider it as a* rescission and not a deferral. 4. Title X Job Opportunities Pro~~~ -- On January 21, the Secretary of Commerce wrote to 42 Departments and agencies asking them to conduct a thorough review of their programs to identify opportunities for effective temporary job creation consistent with the purposes of the new Title X of the Public Works and Economic Development Act. In reviewing the programs they were asked to identify those programs and projects which (a) would contribute significantly to the reduction of un- employment in eligible areas; (b) could be initiated or strengthened promptly; (c) could be substantially completed within 12 months; (d) would be consistent with locally approved comprehensive plans for the jurisdiction affected whenever such plans exist; and (e) are labor intensive. The Agencies were advised that this program was not to be limited to public works projects or public service jobs and that they should give special attention for stimulating jobs in the private sector for private purposes. At the sane time, we asked our Economic Development Representatives and District staff personnel to suggest projects that could be undertaken using Title X funds. PAGENO="0378" 372 We asked them to give special consideration to the appro- priateness of the proposed activity, in relation to the number * and needs of the unemployed in the eligible areas. Attempts should be made to ensure that the project's labor require- ments--in terms of the absolute amount of labor required and the labor skills required--could be met within the eligible area in which the project would be undertaken. Responses to the Secretary's request have been coming in over the past three weeks. As a first step in organizing the review, we are attempting to compile the requests into a master list. Based on tabulations we have made as of February 26, 1975, we find there are about 18,000 potential projects from other Federal agencies, EDA and the Regional Commissions (Title V and Appalachia). The potential Federal investment required for these projects as estimated by the various agencies is at about $3.0 billion exclusive of a $11 billion proposal from the Interstate Commerce Commission to rehabilitate railroad roadbeds. The proposals reflect an estimate of 3 million man-months of employment. 5. Implementation of other new~programs -- Your staff also requested that we report on our progress in implementing other new programs enacted on September 27, 1974 as amend- ments to the Public Works and Economic Development Act. PAGENO="0379" 373 - 10 - o Title II business development--The September * 27, 1974 amendments provided a number of new tools. for EDA to use in stimulating private sector developnent in EDA-designated areas. These are direct working capital loans, a broader authority for working capital loan guarantees, guarantees of fixed asset loans, and guarantees of lease payments for buildings and equipment. We are presently either processing or have under consideration projects utilizing each of the new tools. We expect to expand the use of these tools in fiscal 1976. * o Section 302 economic development plannimg-- P.L. 93-423 added an important new feature to the Public Works and Economic Development Act by expanding the scope and purpose of the exist- ing planning assistance program to include planning responsibilities at all levels of the non-Federal governmental structure. The new authority provides for economic develop- merit planning grants for States to assist in a comprehensive State planning process. PAGENO="0380" 374 - 11 - Significantly, P.L. 93-423 mandates to States receiving Section 302 grants, participation of the State and its local government and sub-State jurisdictions in coordinating a plan of action. In early January, we wrote to the Governors advising them of this program and extended them an invitation to participate in the 302 effort if the mandated planning approach fit their needs. They were informed * that the States would have considerable latitude in the use of these grants as long as there was involve- ment of public officials and private citizens in * analyzing local economies, defining development goals, determining project opportunities, and formulating and implementing development programs. They were also advised that the results of the planning process * should be incorporated into the State executive * decision making process in some formalized way. Most of the States have responded to th~ early January communication and we are presently assisting them to make formal applications. As you know, the fiscal 1975 appropriation also made funds available to sub- * State units in the amount of $3.5 million. We plan to use $1 million of this for Economic Development Districts, PAGENO="0381" 375 12 approximately half for A-95 purposes and the remainder to provide small grants to a limited number of districts enabling them to provide professional services to local governments within the district on a demonstration basis. The remaining $2.5 million will be used to support city planning efforts. We are presently working with cities to develop applications. ° Section 304 grants to States -- A new state grant.. program was also added to our authorities last September. The program provides for funds to be; apportioned among the States for their use in supplementing or making basic grants and loans authorized under Titles I, II and IV of the Public Works and Economic Development Act. On February 14, 1975, all States, the District of Columbia, Puerto Rico, the Virgin Islands, Guam and American Samoa were sent grant offers for the apportionment of the $13 million fiscal 1975 appropriation. Once these offers have been accepted, the funds will remain available until expended. At this point, we have no indication as to howthe States plan to use ~their apportioned funds. PAGENO="0382" 376 - 13 - Title IX, economic adjustment -- Since the enact- ment of Title IX (September 27, 1974) *we have consulted with government agencies, public interest groups and others on the development of implement- ing regulations. These were published in final * form &nd became effective December 30, 1974. We have also been developing further implementing instructions, criteria and guidelines. Concurrently, * our Regional Office staffs have been contacting state. and local governments to determine the existence of Title IX adjustment assistance requirements based * * on the existence of. problems. In this review we * have been ascertaining the extent of problems, the level of planning which has already been done, and preliminary assessments of adjustment grant needs. In the next few weeks, when our implementing guide- lines and criteria are in final form, we will be asking our Regional Offices to begin inviting applications for planning and/or adjustment grants from eligible areas. * ° Title I operational grants for health facilities -- Section 102 of the Public Works and Economic Development Act was amended to authorize EDA funding * of grants for the operation of any health project funded under Title I. These grants may be made up to 100% ofestimated cost of the first year of operation PAGENO="0383" 377 - 14 - and up to 100% of the deficit in funds available for operation the second year. hEW must approve a plan before second year grants are to be approved. At present, no applications have been received for this type of funding. Thank you Mr. Chairman, this concludes my prepared statement. I will be glad to answer any questions the committee may have. PAGENO="0384" 378 STATEMENTOF DANIEL GARBERN SPECIAL ASSISTANT TO THE SECRETARY OF COMMERCE FOR REGIONAL ECONOMIC COORDINATION BEFORE THE COMMITTEE ON PUBLIC WORKS UNITED STATES SENATE March 4, 1975 Mr. Chairman, Members of the Committee: I am Dan Garbern, Special Assistant to the Secretary for Regional Economic Coordination. I have been associated with the Office of Regional Coordination, first as legal counsel for the Office and, beginning in 1973, as Special Assistant to the Secretary. The Special Assistant and the Office of Regional Econonic Coordination are charged with assisting the Secretary in carrying out his responsibilities with respect to the Title V Regional Commissions. With me today, pursuant to invitations issued by the Committee, are the Federal Cochairmen of the seven Title V Regional Commissions. Each has a brief statement concerning his Commission's budget and program. Before turning to the individual Commissions, however, I would like to respond briefly to the questions which the Chairman asked of the Department of Commerce in his telegram of February 21. You have asked us to address three principal areas; our budget request for FY 1976, how regional programs fit into total regional planning, and the Administration's policy for the future of the Title V commission program. PAGENO="0385" 379 -2- First, let me briefly outline our FY 1976 Budget request. For all seven commissions plus Departmental administration costs we have asked for $42,081,000. This is roughly $5.9 million for each commission. Each of the Federal Cochairmen in their presentations will discuss their programs. Next, you have asked how do Regional Commission programs fit into total regional planning? The five older Commissions were organized in late 1966 and early 1967 with regional planning as their major function. At the sane time, the multi-county economic development districts authorized by Title III of the Public Works and Economic Development Act were also being organized and were just begin- fling to undertake their distr.ict planning. This early in the planning process there were few, if any, opportunities for planning coordination or integration. A major problem that arose early in the Regional Commission experience was that regional planning was dependent to a large degree on the ability of member States to carry out the State planning that was seen as a logical input to the regional plans. Accordingly, the Regional Commissions at this early stage began supporting their States with financial grants for state investment plans and to support the necessary staffs to undertake state planning. In general, though, local and district input and participation in the planning process was minimal at this stage of the program. 50-194 0 - 75 - 25 PAGENO="0386" 380 -3- In December 1967 the President issued an Executive Order which, among other things, created a "Federal Advisory Council on Regional Economic Development". The Council, composed of the heads of 10 major agencies concerned with economic development and the Federal Cochairmen, was assigned responsibility for reviewing proposed long-range comprehensive economic development plans prepared by the Commissions. The plans were reviewed by field offices of the Federal agencies and, subsequently, at the Washington level by the Feder~ Advisory Council before being approved by the Secretary of Commerce. Since those plans were developed in the early 1970's, the state of the art has advanced. The older Commissions are now in the process of revising their plans. In so doing they are providing for specific and positive involvement of local and development district organizations as well as State and Federal personnel. The Ozarks revision, for example, is in part the product of a series of meetings with district, local, and state officials in the five-State Ozarks Region. The revised plan is in preliminary draft form, and it is being reviewed again by district and State people as well as by Federal personnel in the Region before being referred to Washington. The two newer Commissions, Old West and Pacific Northwest, both established in late 1972, are nearing the end of their drafting of long-range comprehensive plans. These commissions PAGENO="0387" 381 -4- are also seeking active involvement of district and local people, as well as Federal officials, in the long-range planning process. In speaking of planning, I use the term "process" deliberately. We do not believe the Congress intended for the Commissions to produce neatly bound "plans" designed only to gather dust on some bookshelf. Rather the plans, which are under constant review and revision, should be useful to the several levels of Government and the private sector in the Regions and they should evolve in a changing process as needs are net and new needs and opportunities arise. In major spirit these plans are designed to articulate probiens which cross State lines and which require cooperative interstate effort if they are to be resolved. In the early years these problems typically derived from some forn of lag or distortion in the regional economy. More recently, a number of other problems transcending State lines have been pushed to the forefront. Energy, transportation, water resources, and environment are some of these concerns. These are matters which cannot be handled adequately by action of a single State. For. example, exploiting the energy resources of one State may require water from another and the development of those resources nay have a profound effect on the economy of still a third State. This is, in fact, the situation in the Old West Region. The Regional Commissions do have the flexibility PAGENO="0388" 382 -5- to help their member States and local governments meet such regional problems on a coordinated basis. I should add that they also have the flexibility to pool their experience and resources on an inter-regional basis. New England, Upper Great Lakes and the Appalachian Commissions have been cooperating with respect to rail transportation serving their respective regions under the Rail Reorganization Act. The Four Corners and Old West Commissions have held joint sessions to discuss energy resource developments which affect both Regions. A word about interaction with Federal agencies. The Department of Commerce recently surveyed the question of coordination between the Regional Commissions and EDA and found that coordination is generally good, particularly in the field. Some areas were indicated where improvements could be made and we are moving to make such improvements. However, EDA is not the only Federal agency with which the Regional Commissions work and there is need for improving liaison and coordination with other Federal and state agencies. In the years since the Regional Commission program was initiated, the President has established Federal Regional Councils in each of ten Federal Administrative Regions. The Federal Cochairmen have worked informally with these Councils and will attempt to improve this channel of coordination. PAGENO="0389" 383 -6- The comprehensive planning process of the Regional Commission affords the several levels of Government an opportunity to develop a balancing of interests, to select priorities, and to develop strategies which will be supportive rather than competitive or duplicative. On the basis of my several years of working with this program I would not suggest to you that we have reached the millenium, but I am satisfied that the Regional Commissions are moving in the right direction. The Regional Commissions, composed as they are of State Governors and a Federal Representative, are simultaneously a bridge and a staircase. They help bridge different functional activities and through both downward and upward movements they provide a means of coordinating development proposals of the several layers of Government that comprise our Federal system. The third question which the Committee asked concerns the future of the Regional Commissions. At the *time President Ford signed Public Law 93-423 which extended the EDA and Regional programs to June 30, 1976, he said "During the next several months,, and certainly before the expiration of this legislation, the Congress and the Administration must begin to,consider changes to further improve the design of economic development and adjustment assistance ." PAGENO="0390" 384 -7- This effort is underway. The Administration is aware of the provisions of the Budget Reform Act which require that proposals be submitted to the Congress by May 15 and it is expected that recommendations will be made to you by that date. As of today, however, the process has not progressed to the point where I can outline to you the kinds of proposals which will be sent to you. Our own assessment process is simply not far enough along for that. I can say, however, that an underlying philosophy is the need to make further progress in strengthening the community and State roles in these programs. Thank you, Mr. Chairman. That completes my statement. I am, of course, available for questions, but you may prefer to hear first from the Federal Cochairmen. PAGENO="0391" 385 STATEMENT OF DONALD W * WHITEHEAD, FEDERAL COCHAIRMAN, Appalachian Regional Commission, before the Senate Committee on Public Works, March 4, 1975 We are pleased to appear before the Committee this morning in the first hearings the Commission has participated in under the Congressional Budget Act of 1974. In my statement I will attempt to provide answers to the questions concerning the 1976 budget which the Committee has indicated it would like to have covered. Before going into the details of this budget request, may I express my appreciation to the Chairman and to the members of this Committee for you~ strong support of our program in the past; and may I add an expression of hope that, as the Appalachian Commission and its non-highway program draws nearer its scheduled date of expiration on June 30 of this year, we will again be found to merit this Committee's support for continuation of a program which many of you helped to shape and whose mission has not yet been completed. As you know, our highway program Is authorized through 1978, while the Commission's non-highway program authorizations expire at the end of the current fiscal year. The President In his budget to the Congrees, has indicated his intent to seek a continuation of the Commission and these non-highway authorizations. The 13 Appalachian States have endorsed a continuation program that follows the same basic lines set forth by the Congress in 1971. In short, after having assessed the progress made In the region and the performance of the Commission's program over the past ten years, the Appalachian States unanimously concur that the innovative PAGENO="0392" 386 -2- State/Federal partnership envisioned by the Congress is, and remains, a valid and viable concept. Moreover,. experience has shown that the planning and decision-making process that has evolved from this concept provides the region with a sound basis for merging Federal/State/local efforts to further improve the region. Accordingly, the changes proposed by the Commission can be viewed as perfecting amendments which will give the Commission a more com- plete arsenal of tools with which to deal with the region's problems and opprotunities. In seeking continuation and some amendments for its program the Commission is mindful of the fact much progress has been achieved for the region and that opportunities exist to reach the goals set forth by the Congress. The foundation of highways and public works, while not complete, provides the basis for achieving sound economic and community development, while the recent upsurge in coal demand offers an opportunity to accelerate that development. The future thrusts of the Commission's program will seek to capitalize on these conditions and give emphasis to several important con- cepts: 1. Investments will be more heavily directed toward the provision of essential public services, such as health care. 2. While maintaining its investment strategy on the principles of con- centration, locational efficiency and supplementation, areawide planning and programming will be encouraged in order to better meet the needs of rural areas. PAGENO="0393" 387 -3- 3. In order to strengthen the Federal/State partnership, States and local development districts will assume increased responsibility for program management and administration. 4. For moving toward economic self-sufficiency and diversification, efforts will be made to encourage new enterprise development. 5. The Commission will promote an immediate awareness and response to the region's role in meeting the nation's energy needs. The program has had a unique endorsement over the last four years from the Administration and from the Public Works and Appropriations Committees of the Congress. The evidence of this endorsement is found in the high percentage rates of appropriations to authorization, over 90 percent; the general agreement on the use of the single allocation plan for non-highway funds; the negligible effect of impoundments; and, the agreement reached by Congress and the Administration on the single program proposed for rescission. 1976 BUDGET REQUEST Last fall, the Commission submitted a budget request to the Office of Management aird Budget, reflecting the President's directive that fiscal restraint be employed in an effort to hold the Federal budget in balance in fiscal year 1976. I believe now, as we believed last fall, that the funding levels and legislative authorities we have proposed for the new budget represent a good estimate of a responsible and pro- gressive program operation for fiscal 1976. We are now working with the Admin- istration to develop our legislative program, so I can only approximate the general thrust of the legislation to be proposed. Basically, the program is working well and we are not contemplating any radical changes in directions. PAGENO="0394" 388 - 4-. The 1976 budget request for the Commission and its program includes $320.4 million in Budget Authority, asks for $295.4 million in appropriations and estimates nearly $340 million in outlays. At the end of this statement we have provided a table showing the breakdown of these amounts as compared with 1974, 1975 and the fiscal year transition period. I should point out that the budget authority differs from appropriations solely in the highway program. The budget authority consists of the contract authority while the appropriation includes the cash to liquidate that authority, our obligation ceiling. The estimate for outlays for 1976 is at a higher level than the appropriation requirements, and represents the impact of a large amount of projects which have been obligated, but not fully disbursed. As is the case with most construction programs, completion of the work, and consequently the outlay of funds, may take several years following initial obligation of the funds. As the members of the Committee know, our program authority Is divided into two major categories, "highway" and "non-highway" programs, reepectively. I will deal first with our budget request for the non-highway program. THE NON-HIGHWAY PROGRAM Originally the Appalachian Act provided specific sums or authorization limitations for each of the non-highway programs authorized by individual sections of the Act. In 1971, however, your Committee led the way in estab- lishing a single authorization for non-highway programs, authorizing $282 million for the two year period 1972- 1973 and $294 million for 1974- 1975. For these years we have been appropriated $260 million for 1972-1973, and $248.5 million for 1974-1975. During this four year period, appropriations PAGENO="0395" 389 -5- amounted to nearly 90 percent of the funds authorized indicating the the Public Works and Appropriations Committee and the Administration were in substantial agreement as to the funds necessary to carry out the Appalachian program. The single authorization was an outgrowth of the Committee's intent that "the Commission have maximum flexibility in determining priorities for the investment of these funds. . ." This added flexibility is bring utilized in our 1975 program, with the consent of the Appropriations Committee, for a procedure in which funds for most of the non-highway programs are allocated to the Indi- vidual States in a single amount, rather than four or more separate allocations as in the past. This procedure permits the States to develop a single plan for the investment of the Appalachian funds so as to provide the best combination of projects for carrying out the States and local development district plans and without the restriction of categorical allocations, which tend to force investment decisions with less regard for State and local priorities. The Com- mission has always had a mechanism to provide some flexibility by permitting loaning and borrowing of allocations among States, and the single allocation system is a logical extension of that practice. On the basis of current State plans for 1975, the change to the single allocation system is not going to create any radical changes in the types of projects assisted in the immediate future. There will continue to be heavy emphasis on health and child development pro- jects; the amounts spent on water and sewer projects will increase; and, there will be a decrease in vocational education construction as the needs for construction are more nearly met in many areas. PAGENO="0396" 390 -6- Our 1976 budget request for non-highway programs was $133.5 million, the same as appropriated for 1975. In preparing for the 1976 budget, we wanted realistic estimates from the States as to their priorities for the utilization of funds. Accordingly, we asked them to indicate how they would spend their share of an appropriation at two assumed levels, approximately $25 million below and $25 million above the 1975 appropriation. From these priorities in context of the guidelines given by the Administration we recommended and the States concurred in an estimate of $133.5 million which was the amount subsequently included in the Presidents budget. We estimate that the continuing emphasis on the health, education, and child development programs would command about $78 million, or about 60 percent of this total. This is double the amount of $38 million estimated for community facilities (primarily water and sewer systems which are also health related) and natural resources (primarily mine area restoration). We are estimating about $5 million for the increased activity in enterprise development and rural transportation, fOr which some refinements in legislative authority is being sought this year. In short, we are including in our 1976 budget a program expansion of about $5 million, which will be offset by a similar program reduction largely from the area of grants for vocational facilities construction. As to the needs in the non-highway program beyond 1976 we believe these could be encompassed within the range of our most recent authorization, which was $294 million for the 1974-1975 biennium, slightly less than $150 million annually. While the overall need in the Region is large we feel that these PAGENO="0397" 391 -7- authorizations would enable us to carry out programs of a limited number of program types, which, with other Federal, State and local funds available, will be sufficient to continue to provide the needed facilities and improvements to the health and education of the Region's people for a lasting improvement in the Regionts economic condition. These authorizations would be consistent with the refinements that the Commission has recommended be included in our legislation. The legislative package as was presented to the Administration does carry, however, one additional program element which is not included in our 1976 budget, namely a new program for grants to States to temporarily assist in retaining railroad branch line operations felt essential for economic growth. We will be working with the Unites State Railway Association and concerned government agencies in the transportation field to develop estimates for the needs of the Region. THE HIGHWAY PROGRAM As I stated earlier the Appalachian Highway program is presently authorized through Fiscal Year 1978. The 1976 budget would provide $160 million for the Highway program, the same amount as appropriated for 1975, while the Commission had requested $185 million, the full amount authorized. The budget, however, does include $35 million for the three month fiscal year transition period, July 1 to September 30, 1976, an increase over thE~ $25 million requested for that period. By that time total appropriations for the highway program will be only $15 million less than the cumulative amount authorized through the old fiscal year, June 30, 1976. PAGENO="0398" 392 -8- With reference to the relation of the budget to the needs for the region, the highway program is relatively easy to discuss since the Appalachian Corridor System is a known system. These corridors are all designated, we know their mileage, and we can estimate their cost, which unfortunately increases as do other highway programs. The variable factors are the number of years we should take to complete the system and the annual amount we should apply to the task, At the present time 1,345 miles, or about 50 percent of the 2,700 authorized miles, have been contracted for construction, of which 1,038 miles have been completed, In 1972 we conducted a cost survey which found that over $1,500 million would be required, over and above the amounts authorized through 1978, to complete the system. We are further advised that highway construction costs have gone up about 50 percent since the close of 1972. Thus to complete the corridor system would require substantial amounts of funds through increases in annual authorizations and extensions of time. The increased cost to complete the highway program results from two factors: first, a general rise in all highway construction costs; and secondly, adoption, by the Commission, of a 70 percent Federal contribution rate so as to remain competitive with the regular Federal-aid highway system. Concerned with these mounting costs, the Commission last year adopted a policy establishing priorities for action on the unimproved or incomplete segments of the corridor. By this process the Commission defined, with each State, priorities for initiating or completing action on State line crossings and continuity of improved segments. PAGENO="0399" 393 -9- The Commission has been able to make progress in the highway program through two mechanisms: in 1967 Congress gave the Commission prefinancing authority, whereby States funds may be used to initiate projects with later Federal reimbursement. With this authority a number of our States have been able to commit funds in excess of current obligation limits. Secondly, the Commission regularly revises State obligation ceilings to assure that maximum use is made of available funds within each fiscal year, enabling progress in those States which are ready to commit their highway projects. EFFECT OF PRESIDENTIAL IMPOUNDMENTS Mr. Chairman, in your telegram requesting my appearance here today, you specifically asked that I discuss the effect, if any, which Presidential impound- ment of funds appropriated for the Appalachian program may have had on the program. - We have experienced two Presidential impoundments of funds,'both in the transportation area. The largest involved the impoundment of $40 million in contract authority for special airport safety grants provided in the 1971 amend- ments to the Appalachian Act. This contract authority was impounded primarily because there were other sources of Federal funds available for airport safety projects and because the Commission itself generally placed a lower priority on this program in the competition for appropriations. I think it is significant that the program was rescinded last December as the first proposed rescission accepted by the Congress without change. The second impoundment concerned $25 million in highway funds which were appropriated by the Congress in 1973, in excess of the $180 million requested PAGENO="0400" 394 - 10 - for that year in the budget. The funds were released in 1974 and the impoundment had a minimal effect on our highway program, thanks primarily to the prefinancing feature which Congress wrote into our highway program in 1969. Prefinancing, as the Committee knows, allows a State to commit State funds to Initiate construction with later reimbursement for the appropriate Federal share. In 1973, the States prefinanced more than $50 million, the largest amount in the history of the program. These projects were then converted into obligations in the succeeding fiscal year, so that by the end of fiscal 1974, there were virtually no projects in the prefinanced category. TITLE X PROJECTS Again in response to the Committee's request, we have information regarding the Appalachian Commission's participation in the Title X Job Opportunities Program which would be administered by the Department of Commerce. On January 21 of this year, the Secretary of Commerce requested that we provide to his department applications for proposed activities under the Job Opportunities Program. The Secretary established a deadline of February 5 fdr submission of these applications. The rather severe time constraints thus imposed made it impossible for the Commission to conduct thorough review and analysis of some 1, 300 pro- ject applications which we received from our local development districts and member States for funding under this program. These applications involved total funding of nearly $300 million, but the Commission took cognizance of the fact that many of the project applications would, upon closer examination, prove to be of low priority or ineligible PAGENO="0401" 395 -11- for funding, or eligible for funding under the Public Services Jobs Program, rather than Title X * A subsequent staff review did result in the submission of a revised list of projects, by priority, with a total cost of $163 million. In recognition of the fact that total appropriations for the program at this time amount to only $125 million, the Commission has requested an initial allocation of $25 million for funding of State priority projects. These priorities were established in three categories in the following order: regional develop- ment; human resources; and public services. A $25 million allocation would provide funds for 115 proposals, with approximately 80 percent of the money going into the `development" priority. The Commission also requested an additional allocation of $10 million to finance a housing renovation project developed by the Commission staff. This project involves the construction, repair or winterization of at least 4,600 housing units in the region, providing 579 man-years of employment. CONCLUSION Finally, Mr. Chairman, may I say that the need for facilities and services hi a region as vast and as relatively underdeveloped as Appalachia, is a large amount. We can say, that if the Congress had charged the Appalachian Commission with primary responsibility to help the region recover from its economic and social distress, it would require larger sums of money than those which we have requested over the years. Sfl-1Q4 1) - 7~ - 26 PAGENO="0402" 396 - 12 - Our mission has been to focus the publics attention on the problems and potentials of the region as a region; to channel both public and private invest- ments into projects for public services and industrial growth in the region to make it self-sustaining and more prosperous; to serve as a laboratory' in which experiments with new ideas in social services, planning processes and government relations could be tried; and, to provide a measure of cohesion for the massive efforts involved in the Region's recovery. We do feel that adequate sums have been available to carry out this mission. Working with other agencies and departments of the Federal government, with State governments, and with private enterprise, the Appalachian Commission has operated as a "broker" in coordinating the planning of development projects, in securing adequate funding for them, and in ensuring that such projects meet regional, as well as, local development goals. For every dollar contributed to an average non-highway project by the Appalachian Commission, $2.40 are contributed from other funding sources, including 75 cents from other Federal and $1.65 from States and local sources. Since ARC funds often represent "seed money" to initiate project planning or other start-up processes, or contribute to local "matching share" funds for Federal grants, the impact of well-chosen development investments goes well beyond the actual dollar amounts expended by the Appalachian Commission. Our budget request for fiscal year 1976 represents, in my best judgement, both a responsible level of funding and an ambitious and worthwhile program of greatly needed assistance to a Region of this country in which this Committee PAGENO="0403" 397 - 13 - and this Congress have shown particular interest and concern in the past, and whose people we are honored and pleased to serve. I would be happy at this time, Mr. Chairman, to respond to any questions the Committee may have. PAGENO="0404" 398 APPALACHIAN REGIONAL COMMISSION Budget Authority, Appropriations and Outlays (millions of dollars) Fiscal Year FY 1974 FY 1975 FY 1976 Transition I. Budget Authority Highway Program 185.0 185.0 185.0 -- Non-Highway Program 115.0 133.5 133.5 12.5 Salaries and Expenses 1.5 1.7 1.9 0.5 Totals 301.5 320.2 320.4 13.0 II. Appropri ations Highways (liquidating cash) 155.0 160.0 160.0 35.0 Non-Highway 115.0 133.5 133.5 12.5 Salaries and Expenses 1.5 1.7 1.9 0.5 Totals 271.5 295.2 295.4 48.0 III. Outlays Highways 159.1 180.0 185.0 55.0 Non-Highway 130.5 158.3 153.0 40.5 Salaries and Expenses 1.5 1.5 1.9 0.5 Totals 291.1 339.8 339.9 96.0 50-194 713 2/24/75 PAGENO="0405" 399 TESTIMONY OF R. JACK HAWKE, FEDERAL COCHAIRMAN of the Coastal Plains Regional Commission before the U. S. Senate Public Works Committee on March 4, 1975 Mr. Chairman, distinquished members of the Committee, I am Jack Hawke, Federal Cochairman of the Coastal Plains Regional Commission. I was appointed to this position in May of 1974. In behalf of my fellow members of the Commission and myself, I wish to express our gratitude for the opportunity to appear before this Committee topresent the views of cur Commission with regard to our budget request for fiscal year 1976. Recognizing your new budget responsibilities, we are delighted to cooperate with your Committee. It is a special delight in view of the cooperative relation- ship all Title V Commissions have enjoyed with the Public Works Committee in the past. Our Commission encompasses the eastern sectors of North Carolina, South Carolina and Georgia. The 159 counties in the Region are bound by a cultural, social and economic heritage that has created a kinship spanning more than two centuries. While our Commission concerns itself with all aspects of the lives of the people in the Region, our specific goal is that of closing the incoree gap chat c~ciets between the Region anb the Nation. PAGENO="0406" 400 -2- Mr. Chairman, to answer the first question posed in your telegram is somewhat difficult and complex. For as you know, the Coastal Plains Regional Commission is not considered as a separate agency in the Presidents budget, but as one of the total for all Title V Commissions. Secondly, our budget is part of the total Commerce request and, therefore, we at Coastal Plains do not submit a budget request directly to the Office of Management and Budget. The budget submission to the Office of Management and Budget was prepared by the Department of Commerce and was $7, 327, 000. This was a budget request formulated to hold the line based on the Fiscal Year 1974 appropriation. The President's budget includes funding of $5, 938, 000 for the Commission, and we feel that the amount requested by the Administration will permit us to have a significant impact on our Region's economic problems. We strongly endorse the President's objective of holding the line on the budget andrecognize the difficult choices that must be made among worthwhile programs. Mr. Chairman, you have also asked for the rationale of our original budget submission to the Office of Management and Budget. In view of my response to your first question, you can understand that responses to subsequent questions must also be somewhat difficult and complex. When I first assumed my position with Coastal Plains, I had difficulty rationalizing any request for additional funds. Upon examining the records, it became obvious to me that in every previous fiscal year, the Commission had carry-over funds. Therefore, my first assumption PAGENO="0407" 401 was that Coastal Plains either did not need more funds or could not spend more funds. I have subsequently found that such an assumption is entirely wrong. A quick inventory of our Region establishes a great need for Coastal Plains funds for economic development~ Our Region has a per capita income gap of $1, 027. The Region has an outmigration problem which drains our leadership potential as well as our unskilled and unemployed. The Region has all of the other attributes of a poor area- -low education levels, substandard housing, poor transportation systems (only 5 percent of our highways are four-lane), and yet our Region has great potential and is inhabited by some of the greatest people in the world who are both willing and eager to improve their economic position. Recognizing the great needs of the Region and the great potential, I have no explanation for the carry-over funds at the end of past fiscal years. Therefore, we have reorganized our Commission and decreased our staff size, but improved our efficiency. We are now able to more finely identify specific areas of major need in our Region. The focus of our attention is on four prime program areas. Those within these four areas are Agriculture and Forestry, Industrial Development, Marine Resources, and Environmental Affairs, that we feel our resources can be most effectively utilized. PAGENO="0408" 402 -4- We also adopted a policy requiring all project requests to be submitted for our consideration by February 15 of each year. As a result of that policy, I can report to you today that we fully expect all of our Fiscal Year 1975 funds will be allocated. We will have a carry-over of unfunded projects, not a carry-over of funds. Our budget request for Fiscal Year 1975 is 5. 9 million dollars, and we presently have projects submitted for consideration that total 11. 2 million dollars. As you can see, we will fund only a portion of those projects and will do so on strict priority basis. The Commission- - the Governors of our three States and the Federal Cochairman-- will have to set these priorities based upon advice from our advisory committees, from our Commission staff, and from State agencies. Mr. Chairman, you have asked my opinion on the optimum level of funding and my views on program expansion or reduction, Our first budget considerations established what we felt was an optimum budget reque st. When it became apparent' that Title V Commissions were given a two-year extensioi~ by Congress, the Federal Cochairman was asked by the Department of Commerce to prepare three alternative budgets: $2, 793, 000 for the phase-out, $7, 380, 000 which was equal to the budget for Fiscal Year 1974, and $10, 411, 000 as an optimum budget. We prepared a justification for each of the three budgets, but requested the optimum figure of ~l0, 411, 000 be approved by Commerce PAGENO="0409" 403 -5- and submitted to the Office of Management and Budget. The Governors of North Carolina, South~ Carolina, and Georgia met in a Council of Governors meeting in September of 1974 and unanimously passed a resolution calling for the adoption of the ten million dollar budget as an optimum amount. Our total budget decreased markedly in fiscal 1975. Our total appropriation for Fiscal Year 1972 through Fiscal Year 1974 averaged $7, 528, 000. In Fiscal Year 1975, our total appropriation declined to $5, 855, 000. This reflects a decrease of $1, 673, 000 from our average for the preceding three fiscal years. This dollar figure is not a true indicator of our budget reduction by itself. We must also consider that the effective "buying power" of our budget has been reduced considerably due to the impact of inflation, especially that felt in the increased cost of construction. This reduction has encouraged our Commission into refining its program areas and providing more sound management. This has been our response in support of the-Administration's objectives of fiscal responsibility while still providing a sound program for economic development in the Coastal Plains Region. Our budget mark for Fiscal Year 1976 will permit us to operate at the same or only slightly reduced level as that for Fiscal Year 1975. As you realize, Title V Commissions have experienced a very difficult period. The Commissions have never achieved the level of appropriations first expected by the Governors. The funding has been minimal when compared to that received by the Appalachian Regional PAGENO="0410" 404 -6- Commission which is a similar program. Therefore, Title V Commissions have never been able to discover the optimum level of funding nor have they ever fulfilled their early promise. I do not feel that Title V Commissions should become a government give-away program. We have used our funds for long-range planning and helped establish good planning agencies in all three States. We have properly used our funds for innovative programs for our Region and to stimulate larger investments from other sources. As one example of how our funds stimulate larger investments, our annual report for Fiscal Year 1974 shows that in our supplemental grant program, we invested $2, 733, 000. This sum generated an additional $3, 581, 000 from other Federal agencies and $10, 113, 000 from State a~id local governments. The total impact of funds in the Region created by our relatively small investment was $16, 428, 000. With regard to my views on expansion or reduction of our programs, I must in all candor suggest that due to the current economic conditions we cannot realistically foresee large scale expansions. As I pointed out earlier, our budget has been subjected to reductions in the past. The Commission accepted these reductions and, in order to continue a viable program, we refined our program and provided more management control. I view the Coastal Plains Regional Commission as a uniquely creative agency. We have used this creative ability to actually bring about program expansions withü.: increasing our costs. PAGENO="0411" 405 -7- For example, we have recently developed a series of programs within our Region that are aimed at establishing new avenues for stimulating econo- mic development which go beyond the Commissions supplemental grant and technical assistance programs. Our first undertaking was a series of economic development workshops planned for local officials within the Region. In these workshops, we were able to bring together representatives of Federal and State agencies to share with local officials information about economic development programs which could be of great value to the local jurisdictions. As you know, most small communities are unable to know about all the grant money available to them through the various Federal and State agencies. It was because of this need that we sponsored these educational meetings. I might add, Mr. Chariman, that due to the overshelming reaction and favorable response to the first two of three such workshops planned, we have been asked to plan similar ones on an annual basis. - We are also planning similar sessions for private enterprise within the Region in order to enlighten members of our business community on the processes for obtaining contracts under Federal procurement. We are also planning seminars for minority businesses and those businesses which are classified as small, therefore qualifying for assistance through the Small Business Administration, The entire economic development program is presently under review both by the Administration and the Congress. To suggest a large expansion PAGENO="0412" 406 -8- of our budget during this review process would not be appropriate. The much larger questions must be answered first. But during this review period, we at the Coastal Plains Regional Commission intend to do our verybest for our Region. At the request of the Secretary of Commerce, we recently took an inventory of quick-start projects authorized by Title X of the Act. These proposals amounted to approximately $7Z. 5 million. To date, no funds appropriated to the Coastal Plains Regional Commission have been impounded by the President. PAGENO="0413" 407 Testimony of Russell F. Merriman F~c1eral Cochairniari, New England Regional Commission * b~fore Senate Public Works Committee * * March 4, 1975 Thank you, Mr. Chairman I am pleased to be here at your invitation to discuss the New England Regional Commission program budget for Fiscal Year 1976 The New England Regional Commission comprises the total area of the six Nev. England States and I have served as the Federal Cochairman since November 1, 1972. Since my appointment I have had the unique opportunity to work with the chief executives of the six New England States in developing programs. responsive to the economic needs of the States and. the region as a whole In New England we realize that there are crucial decisions to be made about the future of the region and therefore the C'mmission has been in the forefront in developing regional programs geared to the problems which are unique to this region. During the past two years, the New England Regional Commission has steadily moved toward the. establishment of a cohesive and well-defined regional effort. Through a series of resolutions the Commission has. committed itself to the development of a regional approach to New England's pressing economic and social needs. The program has been refined to be directly responsive to state, federal and other regional efforts as well as to the concerns and irite rests of the States as viewed by the six New England Governors~ . By concentrating on key issues and problems in the areas of energy, transportation and commercial and industrial development, the Commission PAGENO="0414" 408 -2- has had significant influence on federal policies affecting the region and state and regional efforts. However, the Commission's programs represent far more than just a change in programmatic emphasis. They are indicative of a working partnership at the regional le'~'el involving both the federal and state governments. The benefits of this relationship are already apparent. For example, the Regional Administrators of the Federal Energy Administration and the Environmental Protection Agency have indicated on a number of occasions that the New England Regional Commission Energy Program is currently the major planning and policy effort in the region and is being soundly executed. rn addition, members of the Interstate Commerce Commission have reacted favorably on the work being conducted by the Commission in the area of railroad reorganization and the Assistant Secretary of Commerce for Economic Development in a November 13 speech to the New England Economic Conference in Hartford mentioned the New England Regional Commission's International Trade Program in detail and strongly supported it. To date, implementation of the Fiscal Year 1975 program indicates that the New England Regiopal Commission is continuing to build its reputation by concentrating on major regional economic problems through a cohesive and well-defined program. The combination of today's energy costs, transportatio:~ problems, an antiquated industrial complex, a mature economy and the high cost of PAGENO="0415" 409 state arid local government, would indicate that the region's unemployed are victims of very basic regional problems which can only be overcome by a cooperative regional approach such as the programs now being under- taken by the New England Regional Commission. The Commission submitted to the Office of Management arid Budget, through the Office of the Secretary of Commerce, a budget request for $7. 4 million for Fiscal Year 1976 to continue and expand programs presently underway in New England. While our original request would maintain and expand our total program emphasis above the FY 1975 appropriation, we feel that the Administration's request of $5.9 million in the Fiscal Year 1976 budget will enable us to adequately continue our programs in the coming year. In answer to your question on impoundment of funds, we are pleased to advise the Committee that there has been no Presidential impoundment of Commission funds. Furthermore, Mr. Chairman, we feel that the potential of the programs presently underway in the New England Regional Commission - that is, energy, transportation arid comm er cial arid industrial developrn ent - will not only help to stimulate the economy in the future but will help to preserve our present economic base. This base is currently threatened by high energy costs, high trans- portation costs, reduction in transportation facilities available and an out- migration of industrial capabilities. We feel that the continued regional approach to overcome these problems is vital to the region's economic future. PAGENO="0416" 410 Under Title X of the Public ~`. orks and Economic Development Act - Job Op2ortunities Program - the Commission has expressed strong ~ rest in the opportunities a~orded Net'; Englander's under the title. \~e have submitted 32 carefully screened proiects from the six state area t3:alling SlO, 623, 244. These are labor intensive with 76. 3~s or $8, lOS, 074 allocated to labor costs. This reflects total man months of labor of 8, 949 :~onths or 746 man years. That concludes my statement, Mr. Chairman. I will be glad to answer any questions you and the members of the Committee might have. PAGENO="0417" 411 Statement of Bill H. Fribley, Federal Cochairman, Ozarks Regional Commission before Senate Public Works Committee March 4, 1975 My name is Bill H. Fribley and I am Federal Cochairman of the Ozarks Regional Commission. The Ozarks Regional Commission represents the first region designated under Title V of the Public Works and Economic Development Act. Until 1972 the Region consisted of 134 counties with approximately three million population in the generally mountain and hill area of Arkansas, Missouri, Oklahoma and Kansas. In 1972 the entire States of Arkansas, Louisiana, Missouri, and Oklahoma were designated by the Secretary of Commerce and in 1974 the entire State of Kansas was desig- nated by the Secretary. The Region is now one of 15, 000, 000 people in five contiguous states. The Commission began in July of 1974 the drafting of a new com- prehensive regional plan for the expanded Region. That draft plan is now complete and the review and approval process is underway. We expect to present the plan w it hi n t he `t b i r d qua r t e r of t'h i s year. I would like to share with you just a few of the findings in this not yet approved plan: -- The shift of population within the Region from the rural areas to metropolitan centers seems to be coming to an end. 50-194 Q - 75 - 27 PAGENO="0418" 412 -2- - - The rural districts have been steadily improving their relative income position, even though incomes in the Region still lag behind those of the nation. This suggests that the efforts to improve the economic structure of the more rural areas of the Region may be havi~ng some success and that continued vigorous efforts may prove even more successful. The Region has a unique navigable waterway system which is the most important coalescing factor of the Region ~ has a generally strong railroad system, except for the weakened condition of the Rock Island Railroad and the Missouri-Kansas-Texas lines which pose branch line problems in rural areas for both agricultural and industrial products. - - While the Region has shown it has an available work force, easily trainable for industrial occupations, the lack of long- term experience in the rural areas with industry poses development problems for both the training of a labor force and for local governments in providing the varied~ municipal services modern industry requires. The draft plan sets a central regional ~ lays out specific objectives in reaching that goal; and provides indicators against which to measure the progress of regional effort8. PAGENO="0419" 413 -3- - - The proposed goal statement, which our Commission is conside~ring, should be of interest to this authorizing committee. It is: "To preserve and strengthen th~ present balanced distribu- tion of population between urban and rural areas within the Region, in a context of job opportunities for the unemployed and the underemployed, rising real incomes, adequate community services, and a healthy and pleasant environ- ment." -- The plan will present priority categories of public invest- ment funding for the Commission to utilize in reaching its objectives over a five year period and each category will have a.stated amount of Federal funds required. On January 15, 1975, I forwarded to each member of this Committee and to the Committee staff an evaluation by outside professionals of 32 completed Ozarke Regional Commission funded public facility projects primarily in the field of industrial sites and vocational-technical schools. The Commission provided $7.4 million to these projects whose total cost was $28. 5 million. Intensive interviews and survey showed that in~ 24 indus trial site project~2 640 more full time jobs were delivered than were promised in the application for funding. I urge each member of the Committee to read this evaluative report on the Commission's activities. PAGENO="0420" 414 -4- My request to the Office of Management and Budget for FY 1976 for the Ozarks was $7, 324, 000 which compares with $5, 855, 400 in FY 1975 new budget authority including the FY 1975 supplemental appropriation. My budget request was based on fwo factors. One was the requirements to maintain this federal-state partnership and the other the need to stay within the framework of the Departmental budget con- straints. The President's budget includes funding of $5,933, 000 for the Commission. I believe this amount requested in the Administration's budget will permit the Commission to carry out a program of substantial benefit to the Region. *There is no question in my mind, in answer to the questions your Committee has presented, that the Ozarks Commission can materially increase its appropriation level in reaching the optimum level of spending for programs. I am, however, cognizant of the alternative need to maintain the overall integrity of the Federal budget.' I would suggest that the new regional plan will recom~nend those optimum levels for Commission utilization. I have no comment on Presidential impoundments because no such impoundment has been applied on our program. You indicated strong interest in the new Title X. Acting at the request of the Secretary, we surveyed the region in January on the potential for funding Title X type projects. Our five states submitted $72, 758, 861 in Title X projects. We have reviewed these projects and PAGENO="0421" 415 -5- have sent forward our selection of those which have highest priority to carry out the intent of the Act. Mr. Chairman, this is my statement and I stand ready to answer any questions you or the other Senators may have. 50-194 0 - 75 - 28 PAGENO="0422" 416 Statement by Raymond C. Anderson, Federal Cochairman, Upper Great Lakes Regional Commission, for Senate Public Works Committee Tuesday, March 4, 1975 Mr. Chairman, the Uppsr Great Lakes Regional Commission, formally organized on April 11, 1967, is designed to spur the economic growth of a 119 county area in northern Michigan, Minnesota, and Wisconsin. This Region, covering 116,000 square miles, with a population of 3,000,000, shares common economic problems. The four member Commission is composed of the three Governors and myself as Federal Cochairman. My name is Raymond C. Anderson. To carry out. the program of this Federal-State partnership in Fiscal Year 1976, Mr. Chairman,, the Commission's original budget sub- mission to the Office of Management and Budget established a funding level of $7,324,000. This amount would have represented an increase of $1,826,000 over Fiscal Year 1975 at its supplemental level. It would, in effect, have restored the Commission funding levels .of'Fiscal Year 1974'. The rationale for the increased funding in the original estimate sent to the Office of Management and Budget emphasized the new priority of energy programs and related transportation activities, both of which. support regional development and aid the national plan to achieve efficient use of our energy resources. . The goal of the Commission's programs is not only to create more jobs but, also, in this period of economic stress, to retain employment in the Region. . . PAGENO="0423" 417 -2- The President's budget balances Commission needs with those o~ other Federal gclvernment agencies and requests $5,935,000 for the~Cgp~ mission. I believe this amQunt will enable the Commission to have a significant impact on the Region's development problems. The optimum level of funding ~or the Upper Great Lakes Regional Commission, Mr. Chairman, has been established in the Commission's Regional Economic Development Plan and Five-Year Program. This envisions a five-year funding total of $381,000,000, with first-year funding of $55,000,000. This Five-Year Plan, adopted in 1970 and currently under review and reassessment, would provide the necessary funds to help achieve greater regional productivity and growth. No Presidential impoundments, Mr. Chairman, have been applied to* appropriated funds for this Commission's programs. The Upper Great Lakes Regional Commission filed an application with the Secretary of Commerce on February 5, 1975, for approximately $17,000,000 in public service job projects under Title X of the Public Works and Economic Development Act. This application stressed. labor intensive proposals and was drawn from state project lists totalling over $75,000,000. They would concentrate on recreation, beautification, and environmental enhancement programs. They are designed for immediate implementation by state agencies and local units of government, and would contribute directly to the Commission's economic development plan and current investment strategy. I would be pleased, Mr. Chairman, to try to answer any further questions the Committee may have. PAGENO="0424" 418 STATEMMNT OF STANLEY WOMER FEDERAL COCHAIRMI―N FOUR CORNERS REGIONAL COMMISSION BEFQBE THE SENATE PUBLIC WORKS COMMITTEE March. 4, 1975 Mr~ Chairman and members of the Committee, it is a pleasure to have this opportunity to report on the program of the Four Corners Commission. The Four Corners Ccmmission su)5mi~ted to the Office of Management and Budget a 1976 budget request for $7,324,000. This budget request rested on two asswnptions: a~ that this funding level would allow the Commission to continue at 1974 levels its development grant and technical assistance program in the fields of education, health care, agriculture and conservation, and industrial development, and b) that increasing emphasis would be given to projects for areas impacted by energy development particularly oil shale, coal and coal gasrficatiofl. PAGENO="0425" 419 -2- The President's budget request includes $5~938 million for the Commission. The President's budget reflects a balancing of Commission needs with those of other parts of the Federal Government. I believe the President's budget will enable the Commission to carry out an effective program for the region. While this level of expenditure may not present an amount commen- surate with the overall Development Plan prepared and approved by the Four Corners Commission, I believe its impact is significant. This past year, the Commission has begun an impaát review of all the development projects funded in its first five years, 1968-72. The agricultural project review has been completed, assessments of ed- ucation, health. care and tourism-recreation projects will be can- pletod this spring, and water-sQwcr plus transportation projects will be screened by the end of 1975. I would like to share with you the consultant's findings, based on information which can be confirmed with the engineers and water managers in charge of the projects for the 59 irrigation projects helped by Four Corners through 1972. 11 Over 2,000 farm families had measurable benefits from these projects. PAGENO="0426" 420 -3- 2) In 28 of the projects from fifty to one hundred percent of the families were IndIan or Spanish American, and in 12 others from ten to forty five percent were minority citizens. 31 The improvement in water diversion and control structures meant an average forty percent productivity increase on the irrigated land involved, and 4) The improved irrigation systems saved an additionaL 27% or 223,413 acre feet of water annually for the farm members. In the semi-arid west, this amount of water saving is an iirportant resource conservation, especially for the $1,650,000 invested by the Commission. The projects also expanded the income earning potential of an important number of our citizens. Detailed information on this evaluation, and the other impact studies now in preparation, will be submitted to the Senate and House Public Works Committees. In addition to its established program, the Commission has special opportunity for ne~i initiatives in two areas: a) Excess Property Program For fifteen months, fromApril 1972 through June 30, 1973 we operated a pilot excess property program in cocperati~on PAGENO="0427" 421 -4- with GSA. Property valued at $12.2 million was provided for communities and Indian tribes in tfte Region and almost 500 new direct jobs created at a total program cost of $60 + thousand dollars. Because the statutory authority was ambiguous, the program was curtailed in June 1973. Last year, Senator Dominici sponsored, and the Committee approved and obtained enactment for new and broadened excess property authority for Title V Commissions. In this time of employment and inflation, we look upon this non-inflationary program as a unique way to assist hard pressed towns, counties and Indian reservations. We hope to obtain and turn over to eligible recipients more than $10 million in 1975 and $15 million in 1976 in such excess equipment and material. b) Energy Resources . While much depends on the energy development programs initiated by the Federal government and private energy companin~, the įovernor menibars of the Commission have strongly indicated their desire and determination to have a strong voice in not only the planning but the implementation phases of resource develop- ment in the Inter-Mountain West. Indicative of their attitudes PAGENO="0428" 422 -5- are the following actions: a) Formation, with the Governor of the Old West Commission of a Western Governors Energy Policy Organization on February 21:, 1975. * b) Adoption of a common planning model and system for all four states to measure economic and environmental impacts of energy, water and mineral development projects, and c) Funding of an increasing number of projects for communIties or.areas impacted by energy development. We expect this trend to continue and would estimate that a very high percentage of our planning, demonstration and grant projects in the next years will be concerned with assisting in the development or dealing with the social and economic impacts of energy resource enter- prise. The Four Corners Commission has not been affected by Presidential impoundments We have had substantial expressions of interest in Title X of the Public Works Act, and projects totalling over $60 million have been PAGENO="0429" 423 -6- forwarded from the Four Corners Region to the Secretary of Commerce for evaluation. We continue to receive project proposals from our states for con- sideration under this new authority and believe such assistance can be of great benefit in a time of substantial unemployment~ PAGENO="0430" 424 STATEMENT BY WARREN C. WOOD FEDERAL COCHAIRMAN, OLD WEST REGIONAL COMMISSION before TEE SENATE PUBLIC WORKS COMMITTEE March 4, 1975 Mr. Chairman, I appreciate the opportunity to appear before your Committee to discuss the Old West Regional Commission's fiscal year 1976 budget request and program. The Old West Regional Commission was organized in August of 1972 to help deal with economic development problems in the states of Montana, Nebraska, North Dakota, South Dakota and Wyoming. It is one of the two newest economic development commissions established under Title V of the Public Works and Economic Development Act of 1965, as amended, one factor which has a bearing upon my remarks today. A second factor which is most significant in any consideration of our program and budget is the region's critical relationship to our national energy requirements. Rapidly expanding coal development in three of our five states is sure to be the predominant influence in the Region's economy for many years to come. In our Commission's brief existence, the necessity of helping the Old West States cope with growing energy industrialization in a predominantly agricultural society and economy has occupied the major share of our time and much of our funds. The Congress appropriated $2 million in fiscal year 1974 to fund Commission assistance to the Old West States in meeting coal development impacts. The Commission received $1.15 million for the same specific purpose in fiscal year 1975, and $1.91 million of our 1976 budget request is to be PAGENO="0431" 425 -2- used in easing energy-related environmental and socio-economic impacts. The nation's energy situation and the vast coal reserves located in the Old West Region represent at once a serious challenge and an enormous opportunity for the Old West States. The course of energy development in the area during the coming months and years will have a tremendous impact on the future well-being of the area. It probably will also have the greatest impact upon future funding needs of the Old West Regional Commission. It is obvious that energy and problems related to its development will occupy the Region's careful attention for several decades at least. Many decisions bearing heavily upon the Region's future will be made in the months ahead by both Federal and State governments and through a growing process of interaction among them. The Commission is intimately involved in this process of interaction. I alluded at the outset to the newness of the Old West Commission. It was organized at a time of uncertainty about the future of the regional economic development commissions. As a consequence, the Commission leadership deferred program starts during FY 1973 and at the end of the year the first Federal Cochairman retired. I was sworn in as Federal Cochairman in December of 1973, assembled a staff and began active operations. Consequently my comments are based on little more than one year's active operation as a Commission. And a majority of that time has been devoted to the urgency of the Region's energy quandry. The Old West Regional Commission's original FY 1976 budget request to the Office of Management and Budget was $7.328 million, and the Administration's budget request transmitted to the Congress contained the amount of $5.933 for the CommissionS PAGENO="0432" 426 -3- While our original request represented our optimal rate of growth, in my opinion, the Administration request will support our program adequately in the coming year. This is because the Commission has a great deal of flexibility in the ways in which it stimulates and sponsors interaction by the States, which in the final analysis is a major share of our goal. It is difficult to say at this time exactly what an optimal program expenditure would be since increased Commission expenditures would require concomitant adjustments in our participating states. I have no doubt that, given the need, the states would make those adjustments since they truly consider this as their program and one which requires their close attention and participation. There has been no impoundment of Commission funds. Turrüng briefly to our program, the Region's primary area of concern is energy development, not only because this directly affects the lives and welfare of citizens in three of our states but because the prospective growth of industry in the Region is bound to have a lasting effect on all of the states. Our energy program deals with what we regard as the two primary problems. The first is availability of water and infringement of energy-related water re- quirements on the needs of agriculture, the communities and recreation. The second major area of activity is in the socio-economic impact of development -- what is going to happen to the Region's society and its economy as small, isolated ranch-oriented communities change overnight into small energy- dominated cities. The Commission's other program areas are: agriculture and natural resources, transportation, human resources, and industrial and capital re- sources. In each of these areas as well as energy resources, the Commission has organized or is organizing advisory committees composed of regional experts PAGENO="0433" 427 -4- in the various fields to help guide our programs. These experts are appointed by the Governors. Some of our projects in the agricultural area include development of a long-range international msrketing program and an assault on the problem of saline seep, a salt sedimentation condition which is gradually removing hundreds of thousands of acr4s from production and poisoning an increasing amount of the Region's water. In the transportation area, our primary project at the moment is analyzing the feasibility of designating an existing airport in the Region as a hub airport which would be linked to all parts of the region by a third level commuter service augmenting current feeder lines. The airport would develop better national connections and ultimately international ones as well. We also are examining the feasibility of a regional school of veterinary medicine. There is none in our' five-state area. Also underway is the first step of an international trade program which would serve the entire region in agricultural productions, natural resources and manufactured goods. Detailed information on any of the above programs and others sponsored by the Commission will be made available upon request. In a recent inventory of quick-start projects authorized by Title X of the Act, we submitted possible projects to the Secretary of Commerce totalling more than $54 million. These proposals represent projects capable of an immediate start and providing temporary employment for thousands of citizens of the five-state area. Thank you for the opportunity to present these comments. I welcome the opportunity to answer any questions which you may have. PAGENO="0434" 428 STATEMENT OF THE FEDERAL COCHAIRMAN, PACIFiC NORTHWEST REGIONAL COMMiSSION JACK 0. PADRICK BEFORE THE SENATE PUBLIC WORKS COMMITTEE Mi-. Chairman and Members of the Committee: tam pleased to have this opportunity to give you my views on. the FY 1976 budget request pertaining to the Pacific Northwest Regional Commission. :Established in December, 1972, the Commission is presently moving from the formative stages of its development to full scale operation. In the initial stages we concentrated most of our efforts in the areas of natural resources and energy, and in regional economic analysis and planning. We have been instrumental in assisting the Region during the "energy crisis", and in exploring the development of alternative energy resources. Much effort has been expended in obtaining valid economic base data and in preparing a viable Comprehensive Economic Development Plan for the Pacific Northwest. This regional Plan, which is in the final stages of completion, will define parameters for informed decision making, and provide a rigorous analytical framework within which program priorities and budget allocationscan be made. One of the princip~l advantages of the Commission over other Federal agencies, we believe, is its ability to respond quickly to identify problems. A recent example of this responsiveness ocurred when a company proposed establishing a major production facility in Idaho but was faced with a shortage of skilled labor. The Commission, in conjunction with Idaho State University and the PAGENO="0435" 429 2. company, designed and implemented an innovative accelerated vocational training program. This effort is expected, within the next year, to meet all the company's labor requirements arid provide productive employment for approximately 700 ,people in the area. Another unique role played by the Commission is bringing the States together to deal with common problems. Two~outstanding examples of Commission-sponsored cooperation deal with resources crucial to the area's economic stability - - forest productivity and fish resources. For years the question of how to improve forest productivity has been a controversial one highlighted by rhetoric of various interestgroups rather than any conscious effort to deal directly with the problems. As a result of a study and subsequent hearings sponsored by the Commission, a Forest Productivity Advisory Committee was formed with representa- tives of the various, and often antagonistic, interest groups to investigate and propose effective solutions to the long- standing problem. To the best of our knowledge, this is the first time that any real attempt to reconcile the conflicting viewpoints has been made. Commercial and game fishing in the Pacific Northwest is a key element in the economy. In the past, management of the fish resources has been an individual State effort despite the regional impact of the industry. Under Commission sponsorship, the * responsible Federal agencies and the various State fisheries departments in the three-State area have been working together PAGENO="0436" 430 3. to develop common regulations and a comprehensive plan for managing this vital resource to the benefit of all threeStates. Already, draft legislation has been submitted In each State as - a first step to reconcile conflicting State laws. In the coming year the Commission intends to invest a larger portion of its efforts in alleviating the pressing economic problems facing the Region. The Pacific Northwest has been continually plagued by unemployment levels consistently exceeding the national average, by wide disparities in per capita income, and by dependence on a limited number of major industries. More than 113 of the employment in all manufacturing has been accounted for by direct employment in its forest products industry. Yet unemployment increased by 20?~ i-n Oregon's lumber and wood products industry during the past year. Many of the Region's plywood mills have closed or curtailed their operations. These problems provide impetus to the Commission to seek action-oriented programs and projects which will result in the'stimulation of employment and the creation of jobs to counteract the Region's current and anticipated economic concerns. For FY 1976, we requested $7,327,000 in our budget submission to the Office of Management and Budget. This request was based upon the requirements of the Region and the need to stay within Departmental limitations. The Administration's budget request to the Congress contains the amount of $5,9~l ,000. While the PAGENO="0437" 431 budget request could have been increased to a level of spending designed to reflect program expansion, it recognizes ~the necessity to stay within and maintain the integrity of the overall Federal budgetary process. have no comment on Presidential impoundments because such impoundments have not been applied to funds appropriated for the Pacific Northwest Regional Comm i ss ion. Earlier last month, as provided by Title X of the Public Works and Economic Development Act of 1965, as amended, we presented to the Secretaries of Commerce and Labor a multi- million dollar group of programs and projects designed to stimulate the economy. These are labor intensive in nature, would create immediate employment at the local level, and in most instances, provide long-term benefits to the Region. Examples of the broad and diverse range of activites included among the projects submitted are a regional accelerated forest management program, a regional agricultural `production and noxious weed control program, various clean-up and maintenance projects, fisheries projects, and a multitude of capital improvement projects. The Pacific Northwest Regional Commission, in FY `76, will continue its efforts to emphasize innovative action-oriented programs and regional strategies for economic development as the foundation for effective investment of its public funds. Senator MONTOYA. We will stand in adjournment. (Whereupon, at 12:15 p.m., the committee recessed, to reconvene at 10:00 a.m., Wednesday, March 5, 1975.) 50-194 0 - 75 - 29 PAGENO="0438" PAGENO="0439" BUDGET REVIEW CORPS OF ENGINEERS WEDNESDAY, MARCH 5, 1975 U.S. SENATE, COMMITTEE ON PUBLIC WORKS, Washington, D.C. The Committee met at 10 a.m., pursuant to recess, in room 4200, Dirksen Senate Office Building, Hon. Jennings Randolph (chairman of the committee) presiding. Present: Senators Randolph, Gravel, Morgan, Hart, and Domenici. OPENING STATEMENT OP HON. MIKE GRAVEL, U.S. SENATOR PROM THE STATE OP ALASKA Senator GRAVEL [presiding}. The hearings will come to order. This morning the Committee on Public Works will conclude a series of budget review hearings on the agencies having programs under its jurisdiction. With the information gleaned from these hearings, we will be equipped to prepared the report required by the budget Com- mittee by March 15. This report will contain the committee's estimate of, and views on, budget outlays and new budget authority for each agency over which we have legislative jurisdiction. Over the past week the committee has reviewed the budget requests of the Federal Highway Administration, the Environmental Protection Agency, the General Services Administration, and other Federal bodies coming under our jurisdiction. We are concluding with one of the most important-the U.S. Army Corps of Engineers. The President's budget request for fiscal year 1976 provides $2.7 billion in outlays for the water resource development programs of the Corps of Engineers, the Bureau of Reclamation, and the Soil Conservation Service. Of this total amount, over two-thirds-$1 .9 billion-is earmarked for the civil works program of the Army Corps of Engineers. With the single exception of the Federal Highway Administration, the funds requested by the corps represent the largest budget of any agency under the jurisdiction of this committee. The passage of the Congressional Budget Act of 1974 has enabled the legislative committees of the Congress to have an input mto the budgetary process for the first time. Beginning at the end of this year, when the new system is fully implemented, the Committee on Public Works will be able to review the proposed Presidential budget both before and after it is submitted in final form. Our views will be (433) PAGENO="0440" 434 presented to the Budget Committee in a report on or before March 15 of each year. The report will contain the committee's views on the budget request of the corps. It will include our evaluation of what new programs should be implemented and what existing programs should be continued. It will attempt to assess the potential of the civil works program as a contributor to our national effort to satisfy our present and future needs, particularly in the areas of economic development, energy, and transportation. To this end we look forward to hearing Maj. Gen. J. W. Morris, director of civil works, delineate for us this morning the Corps of Engineers views on their proposed budget. In the course of this morning's proceedings we hope to receive information-I want to underscore this-on how the corps priorities are determined. We also are interested in ascertaining to what extent the Office of Management and Budget has influenced the corps planning and spending program. We want to learn if, and to what extent, national water resources development policy has altered over the past years. Another item of interest to the committee is the Corps of Engineers response to title X of the Public Works and Economic Development Act. This legislation, the job opportunities program, was enacted on December 31, 1974. It required Federal agencies to review their programs in order to compile an inventory of "quick-start" projects which could provide employment in economically depressed areas. I note that the corps has submitted to the Department of Commerce a list of 2,678 such projects. The committee will be interested in hearing more about this inventory. Following today's proceedings, the Committee on Public Works will be better able to provide input into the long-range planning of the water resources program. We will also fulfill one of the primary objectives of the Budget Act-to assure effective congressional control over the Federal budgetary process. Before I ask you to begin, General Morris, let me ask my ranking colleague if he has an opening statement. Senator Domenici? OPENING STATEMENT OP HON. PETE V. DOMENICI, U.S. SENATOR PROM THE STATE OF NEW MEXICO Senator D0MENIcI. Thank you, Mr. Chairman. I have a very brief opening statement. I would like to say to the general that I happen to be on the Budget Committee, also, the com- mittee that we are going through this process for, and they are hearing today from the Governors and mayors. So in very short order, I will have to excuse myself. But I want to tell you sincerely even though I am new at this com- mittee and will be its ranking member, I do intend to spend as much time as necessary to acquaint myself with it. I have already been briefed by some of your regional people. I compliment you on their performance, the ones that run the region in New Mexico and California. They have gone through their entire process, how they are con- ducting the various programs there and I can tell you unequivocally that I am impressed with their professionalism and indeed rather PAGENO="0441" 4~~5 than looking at the corps as a diminishing responsibility agency, envision its expertise being utilized in areas that it has not been used heretofore. I think you are aware of a very existing assignment in the city of Albuquerque, one of its most challenging studies. They have been authorized there to be the lead agency in a total evaluation of a rather large populated urban center in terms of all the land use of the future; not only irrigation and flooding, but they will be in charge of putting together the entire study of land use for that area. It is an exciting one for Colonel McClennan who is in charge of it and we are going to support him wholeheartedly. It is that kind of project that we envision being the new scope for the corps with its expertise. I thank you, Mr. Chairman. Senator GRAVEL. Senator Hart? Senator HART. I have no statement. Thank you. Senator GRAVEL. General, I am going to ask you to accommodate us and I think yourself by summarizing your statement rather than reading it. Use your statement as a guide if that would not be improper. [Statement appears on p. 460.] STATEMENT OF MAJ. GEN. F. W. MORRIS, DIRECTOR OF CIVIL WORKS, U.S. ARMY CORPS OF ENGI1~IEERS, ACCOMPANIED BY AUGUST SMET, CHIEF, PROGRAMS DIVISION, AND IRWIN REISLER, CHIEF, OFFICE OF POLICY General MoRRIs. Thank you, Mr. Chairman. I would be pleased to do that. I would like before I begin, however, to recognize with me certain individuals on my staff who will assist in answering questions: Mr. Reisler, Chief of the Office of Policy; Mr. Smet, Chief, Programs Divisions. I should inject here that, behind our budget process, Mr. Smet probably has more direct influence than any other member of my staff. Also with us is Mr. Blankinship, Chief, Operations Division; Mr. Shwaiko, Acting Chief of Planning Division. Senator GRAVEL. Senator Domenici has one question that he would like to pcse to you. General MoRRIs. Certainly. Senator D0MENIcI. General, could I ask a question regarding the 2,678 potential projects that you submitted under the title III to the CETA Act which becomes title X to the Economic Development Act? I am sure those projects are going to be screened by Labor and Commerce. It has now come to my attention that it may be rather impossible to comply with the spirit and letter of that job intense public works program because, even though there is a need for these projects, that it might be very difficult to get them cleared because of environmental impact statements and other kinds of conditions not yet fulfilled. Do you know whether or not there should be a serious concern as to whether many of those projects would be subject to long delays because of conditions or laws not yet, met such as NEPA statements PAGENO="0442" 436 or are some of those already cleared and ready to go? If so, could you give me kind of an idea what kind they are? General MORRIS. Sir, I would anticipate that most of the work we have submitted has an excellent chance of not being delayed, because those items of work are principally on federally owned lands and completed projects which are in operation as opposed to new initiatives in areas where there has previously been no work. That is a general statement. I think I can stand by it. There will be specific cases I expect, but by and large, most of this work is for recreation facilities and completed projects in conformance with plans and designs we have already finished and master plans that have been published and are available to the public. So I would expect that we would have a fairly clear trail ahead. Senator DOMENICI. Thank you, very much. Senator GRAVEL. General, the floor is yours. Proceed as you wish. General MORRIS. To be brief, I would like to read the first page only and then proceed with summarizing the rest of it. The reason I read the first page is because it says about as simply as I could sum- marize our feelings about this particular hearing. Mr. Chairman, members of the committee, I am pleased to appear before you today to discuss the U.S. Army Corps of Engineers civil works program and our budget requests for the fiscal year 1976 and the transition quarter for fiscal 1976. This is the first time that testi- mony involving overall program and budgetary matters is being pre- sented before this committee. I consider this an especially important appearance because it brings together and into clearer perspective the three key ingredients in developing and achieving a program of that importance. These in- gredients are authority, means, and execution. Simply stated, the Congress, in speaking for the people of the country decides what national needs are to be satisfied and then it provides the executive branch the authority and the means to fulfill these decisions. Quite obviously, the clearer the authority and the greater the sufficiency of the means, the more responsive the execution should become. The means, which we are to discuss today, most often become the key element in the executive's ability fulfill his responsibilities under the authorities given him by the Congress. At the same time, there are numerous cases where means are withheld or, if available, are unused because the authority is cloudy. With that brief background, I would like now just to summarize the development of the fiscal year budget, to discuss generally the optimum budget and then conclude with a discussion of impacts of certain authorities. I think I can be very brief because I am sure that the committee is aware of the basic appropriations title and, frankly, I think you know what the contents of the 1976 budget are. It will take a moment or two to set the background for budget preparation by outlining some of the trends which have influenced not only the amounts of moneys in our budget, but the distribution of those moneys within the total. As the Corps of Engineers mission has grown over the years, the elements for which we are responsible, of course, have increased. Traditionally, we still budget to accomplish those missions. But in any particular time, we are influenced by national objectives and PAGENO="0443" 437 trends. Today, I think that we must recognize that the energy crisis, environmental considerations, new principles and standards, competi- tion for Federal dollars, and such issues as States roles, use fees, and cost sharing, all impact on decisions which go into a budget. If we responded each year to the pressures of that year, we would have a budget which would be very difficult to deal with in the long- term. Therefore, we start our budget process with the 5-year plan and each year we build a budget, keeping the 5-year plan pretty much as a guide so that we do not deviate too far from our long-term objectives. To build a budget, we issue instructions in the spring to our district engineers and division engineers. They respond and in the process we receive budget guidance from the Office of Management and Budget which outlines the executive's considerations and priorities, particularly in the new-start area. In the late summer, the budget for the following fiscal year is completed and reviewed by the Secretary of the Army and his staff and submitted to the Office of Management and Budget as part of the President's budget in January preceeding the beginning of the fiscal year. Early in the development of the budget, I think we and the execu- tive branch probably were concerned with inflation as much as any other single item. However, as submitted to Congress, I think the fiscal year 1976 budget is evidence of the concern for unemployment as well. To cope with the job situation for this year, we have the largest amount of money we have ever had in construction. At the same time, you will notice there are no new starts, no new construction starts. The rationale for that was that we should put the extra available funds to work immediately, and the best place to do that was in operation and maintenance and in ongoing construction. Under the other items, other than Construction, General and 0. & M., I should point out that the fiscal year 1976 budget- Senator GRAVEL. Excuse me a moment. Would you just repeat what you said about the money increases and the operation and maintenance? General MORRIS. Yes. In addressing the fiscal year 1976 budget, we had become concerned with the job situation, particularly the recession features. As a consequence, you will notice in the 1976 budget generous funding for ongoing construction items and for op- eration and maintenance items. You will also notice that there are no new starts, no new construc- tion starts, and that for general investigations and some of the miscellaneous use accounts, that the amounts of money are lower than they were a year ago. Those budgetary circumstances reflect the concern over the job situation because the philosophy was that the additional funds should be put where they could immediately do the most good, and that was in ongoing construction and in operation and maintenance as opposed to longer term effects of new starts. Senator GRAVEL. That answers the question. It is a very good answer. General MoRRIs. It is an important feature of this budget that I think should be understood. 0. & M. does deserve a moment of elaboration because we are in a critical situation in the maintenance of our inland waters and PAGENO="0444" 438 harbors because of an accumulative shortage of maintenance funds. This accumulative shortage was aggravated because of Hurricane Agnes, the Mississippi River floods of 1973 and 1974, we lost a dredge, and some other things and, as a consequence, we have in the 1976 budget placed particular attention on that feature of our program. There is approximately $50 million just to help us catch up with the maintenance of our harbors and waterways. Senator GRAVEL. That would be considered the navigation aspects? General MORRIs. That is correct. It is in the operations and main- tenance feature of the budget. We feel that this budget is really intensive in production-oriented programs so that we can get the money into the hands of the construction industry and into the labor market as quickly as possible, and also attend to some of the other features such as navigation which bears on the basic economy. I would like just to comment briefly on the optimum budget. The question really is: What is an optimum budget? The answer comes out different, depending upon which way you approach it. In my judgment, an optimum budget would be one which maximizes the efficiency of the investment. That to me would mean we should be able to do our general investi- gations, our advanced engineering and design and our construction in a smooth flowing, uninterrupted, relatively compact and precise procedure which would allow necessary projects to be put into the system in an optimum period of time, optimum as opposed to shortest because shortest might cost extra money to accelerate. But on the other hand, a delayed program costs a lot of extra money while you are working yourself through the program. So an optimum budget would be one which, in my feeling, would give the maximum efficiency to the dollar invested and would bring to these people these valuable programs in a reasonable period of time. I do not think that we have had an optimum budget in that context for many years. We do have in conjunction with programing a 5-year projection- the numbers are in my prepared remarks. I think that is an important feature because again, even though the 5-year projections do not include the effects of new starts, it does give us a guide to follow in looking into the future. You asked specifically about program expansion and reduction. We have considerable capability to expand the program over the short-term and also over the long-term. Program reductions can be influenced by such items as moneys being held in reserve or missions being changed, but at the moment we are not involved in program reduction. The reason we can accelerate, of course, is because of the backlog of work which we have ready to move in any one of the various categories. I think the last point that I would like to mention in my brief sum- mary would be the effects of recent laws on long-term programs. As you mentioned, the Corps of Engineers has a large program in the public works business. It has also an old program. It is a program that has been in existence for 150 years. Many of the projects which Con- gress authorized under different criteria in older days have been over- taken by more recent laws and the authority has been challenged. I can say that NEPA, a good bill which has brought awareness of the environmental problems into public works has been, so far as the PAGENO="0445" 439 Corps of Engineers is concerned, almost completely fulfilled. I would hope that we would be the first Federal agency with a large program to completely comply with NEPA. We have completed environmental impact statements on all ongoing construction and will have it on all ongoing maintenance work by the first of January next year, but we have had our problems. To date, there have been 54 court cases, lawsuits. We are now enjoined from proceeding on 11 of these projects; but the frequency of the suits seems to be diminishing. So I am optimistic that in due course we will have satisfied these challenges to our compliance to the National Environmental Policy Act and those projects which should proceed will proceed, and those which should not, would not. Senator GRAVEL. General, you say the frequency has decreased. Is this because the quality of the work, by the corps has improved, or because people have lost interest in the environment? General MORRIs. I think it is a combination of those two plus a third one. I believe the quality of our analysis has improved. I think the public as a whole is satisfied that we are doing a better job. So to that extent they may have lost interest, but at least they are more confident that what the National Environmental Policy Act expects us to do we are doing. Therefore we are not being challenged as often. I think another very important point, one I was going to get to, is we have worked our way through that group of projects which have been authorized prior to the passage of this bill and we are now enter- ing into a period when all of the projects coming out of the system were developed with the National Environmental Policy Act as part and parcel of the planning process. So they emerged in the proper framework. If I were to put my finger on one area of some frustration and concern in our present program, there are still a handful of projects which were authorized by Congress on which we have completed environmental impact statements that are on file, and for which funds have been appropriated, not only for engineering design but in many cases for construction, and which we are being asked to go back again and sometimes again, to projects formulated and authorized before NEPA, and to ref oimulate these projects. We do not feel that it was intended that we completely abandon the original projects and reformulate them, particularly if the project is authorized and has been adjusted to fulfill the requirements of NEPA. But in any case there are a handful of projects in that category which are taking a great amount of effort which could otherwise be put onto newer projects. So one of the laws that I was referring to is the National Environ- mental Policy Act and I would like to say we are not unhappy with the law. We think we have about satisfied its requirements on the older projects. But there are a handful which are still in the courts and there is still another group for which we are being requested to re- formulate even though they came before the conditions of NEPA. As you know, we have recently been challenged in the courts on the issue of our authority to replace locks and dams, specifically locks and dams 26. We are addressing this matter and the Secretary of the Army has advised that he will submit a report to Congress. Our feeling there PAGENO="0446" 440 is that we have in no way acted improperly, but on the other hand the matter of authority is one which the Congress should resolve, and we would like very much to get this issue resolved. The Water Resource Development Act of 1974 was the landmark legislation. It brought into our program as well as other water pro- grams many new policy statements and new initiatives, nonstructural alternatives, reauthorization programs and so forth. I will be glad to discuss those individually. I am prepared to report on any feature of the bill that you wish. But I would add it to the National Environmental Policy Act as one of the recent items of legislation which has impacted particularly on our program. So I think that addresses the highlights of my statement. I am now prepared for questions. Senator GRAVEL. General, thank you very much. I would like to ask you the $64 question. That is very simply, when the corps decides that this project should be done or that project should be done, you go to 0MB for approval. We only see in the Congress what comes out of 0MB. You come to us and present their case because obviously you are with the administration. You are not with the Congress and we all understand the humanness of the situation. I am not entirely convinced that we should be privy to that knowl- edge. But I think that one of the things which would benefit all of us is to know what decisions are made there and to know what really, and I say this parenthetically, what you sincerely believe must be done. You come to the Congress and tell us what must be done, but many times it is not really what you believe should be done but what 0MB has told you you should believe should be done. Is that an unfair statement to 0MB? Can you respond as to what impact 0MB has on you from the time that you leave with your budget from the Corps Office and come to the Hill as you circuitously come through the White House and 0MB? General MORRIS. Sir, I first should answer the question on the basis that if I felt personally that OMB's influence on the program was one with which I personally disagreed sufficiently strong I would have to ask for a transfer. I really want to make that point. Senator GRAVEL. I know that caveat because I know you, General, but within that context there is compromise on the Hill and there is compromise between your agency and 0MB. We understand that. We are trying to measure the degree of compromise that takes place before we see it. General MoRRIs. Having said that which I sincerely wanted to say, 0MB has in the initial phases of the budgetary process one action which I think has its greatest influence in the program. That is within their judgment, within the Office of Management and Budget, they must carve out of the total Presidential ceiling which they decided a target under which we would operate. That basically is the most significant action they take. Senator GRAVEL. Significant, sir, to you or to their definition? General MORRIS. It is of significance to us because it does constrain us-it does put a ceiling on what we should put into the budget and, having the ceiling established, then priorities get to be important be- cause there is no such thing7 after that point, of what I would call a PAGENO="0447" 441 no-cost item. Everytime you put something in you have to take some- thing out because the ceiling is usually lower than what you might say the optimum program budget would be. Therefore, the matter of priorities has to be resolved. What is the distribution of funds between General Investigations, Construction, General, Operation and Maintenance, General, and General Expenses? And within each of those, what are the priorities for maximum fund- ing, for continuing the work or maybe not working? So the priorities evolve based upon national situations. For example, energy is apriority item. Therefore in compiling the budget even within the ceiling we give priority funding to those projects which would produce hydroelectric power. Problems in urban areas we consider have high priority. Navigation as opposed to say recreation. Those priorities are artic- ulated within the elements of the executive branch. We get those priorities either directly or by consent in discussions with the Office of Management and Budget. Another area where we come to an understanding is where are the priorities for new starts? What is a long-term investment program within any given budget? It doesn't take much money to start proj- ects. You can start a half a dozen projects with a million dollars. But in the long-term they accumulate to a major Federal investment. Senator GRAVEL. Can I interrupt you at this point for a moment, General. In calendar year 1974, the Senate Public Works Committee approved 24 survey iesolutions. I know that the House Committee approved many more. Yet your current budget requests funding for only six new survey starts. In an attempt to quantify what happens, can you tell me where the decision was made to fund only five out of so many? Was it within the Corps, or within 0MB? General Morntis. The new start area is one in which not only the Office of Management and Budget but the Secretary of the Army's office and our office work very closely, because it does establish the parameters of the longer-term program. We basically in our office would have the largest of the many lists that go through the system. Rarely is a project added. Frequently they are taken off. Senator GRAVEL. I am trying to get a comparison figure. The high watermark initiation is 24 and the bottom line is five, How much did you come marching into 0MB with and how much did you come marching out with? General Monms. In new survey starts, the high watermark of 24 1 would suspect many of those were added by the Congress. Senator GRAVEL. They were all approved by the Senate Public Works Committee last year, 24 survey resolutions which we felt were valid. General MORRIs. Let me get a table. Senator GRAVEL. If it is not readily at hand, I will accept it through submission later, There is no problem. General MORRIS. I have here for example that we have 247 studies which are not budgeted or started from which we could have selected starts. Senator GRAVEL. That is House and Senate? General MORRIS. Yes, sir. Senator GRAVEL. 247? PAGENO="0448" 442 General MORRIS. Yes, sir. Senator GRAVEL. Let's make that our high watermark. Obviously you have to make judgments within the Corps itself because of your expertise. General MORRIS. Right, sir. We have 210 studies which are ongoing in the 1976 budget and 1976 transitional quarter. Senator GRAVEL. Of the 247? General MoRRIs. No, in addition. Senator GRAVEL. So you have 210 ongoing studies. But what I am interested in are the 247 approved studies which are not being pur- sued. You evaluate those we send you. You use your expertise to prune the number down, and base your decisions both on benefit-cost analyses and on the total priorities of the program. What I want to know is, did the Office of Management and Budget cut down your recommendation? General MoRRIs. This year we only recommend six. Senator Gravel. I know that. General MORRIS. I mean the Chief Engineers Office only recom- mended six. The six that are in the budget are the six we proposed. Senator GRAVEL. That is after you made this trip to 0MB? General MoRRIs. No, sir, not precisely. We developed the new- start criteria and, out of that, we came up with six studies that we have recommended be undertaken, fully recognizing the 210 that were ongoing. One of our objectives has been to complete studies that are in the system by fully funding them, rather than adding new endeavors which would tend to stretch out the studies that are there in the works. So to put it another way, in the last 4 years, we have reduced the number of ongoing studies from about 350 down to 210. The effect has been that we have increased the amount of money per study per year from $30,000 or $40,000 up to $130,000. So our present objectives have been in the Corps, for the moment at least, to reduce this total time on good projects, put the money on the best studies and move those through the system more rapidly, rather than start new ones. So I wouldn't want you to think that in the case of studies that we are under any particular constrain t to recommend new starts at this time. Senator GRAVEL. I would like to ask one or two brief questions and then go to my colleagues, I want to pursue this for a moment. General, you know my concern. I voiced it frequently about the cost-benefit ratio, the economics underlying that and our ability to straighten out the interest rates and comply with the cost-sharing. In Anchorage we have a classic example right now, and that is a shoaling problem. An economic study was in process. As a result of that study, we realized that the solution was not feasible. Yet in a meeting we found that, as a result of this particular situation, several hundred thousand tons of cargo did not come to the State. The economic impact of this loss was not quantified; yet it is a quantifiable item. And we can't get steel delivery. I have initiated inquiries and they tell me we can't get steel delivery because there is a lack of trans- portation facilities. There is lack of transportation facilities not entirely because of the commercial area, but because of our failure to meet our responsibilities, because of inaccurate economic analysis. PAGENO="0449" 443 Then people do get hurt. We can quantify it. We try to do that. I wonder if since this is so germane, if I couldn't direct your attention to this particular problem. Can we try to use this as a basis to broaden your analysis of the socio-economic impact of a proposed project? I know you are having difficulty within the Corps to try to broaden that definition; but I sincerely think this is the key to our ability to do something. General MORRIS. Yes, sir. We can do that. One of the attentions under section 80(c) requirement, Water Resources Development Act of 1974, is that general area of benefit costs. Senator GRAVEL. The section 80 study is being done by the Water Resources Council? General MORRIS. Yes. Senator GRAVEL. The more I focus on this area, the more I think we should authorize funds for the Corps to make a detailed study of the benefit-cost analysis procedure. This would be an important key to the iesolution of other problems. I don't know how niuch money would be required to do the necessary research, but as the chairman of this subcommittee I would view such a study as a high priority item. Mr. RE1SLER. Mr. Chairman, we did a good deal of work in this area in connection with our Appalachian study and, unfortunately, the use of this secondary type of benefit was not cleared through and been acceptable in many areas. So the section 80 study should be a review of including regional development and regional needs into the economic analysis. Hopefully, when the Water Resources Council addresses this, it will come out next year as called for by your committee. Senator GRAVEL. I have a lot of respect for the Corps and its expertise, since this problem is so knotty, I would think that it would be worthwhile duplicating some effort there. I will turn it over now to Senator Morgan. I apologize for taking so much time. Senator MORGAN. General, since there are no other witnesses, I would like to use a little time for self-education. First of all, do you know or does anyone in your department know how many major projects you have underway now? General MoRRIs. Yes, sir. I can tell you within one or two. Sir, in 1975 appropriations, for example, we had funds appropriated for 244 studies and for 119 advance engineering design projects. We had 250- some projects funded for construction. We had, also, in excess of 400 reservoirs and projects in operation, major projects. The latter figure really could be broken into subparts. Senator MORGAN. When you say you have 244 studies underway and 119 in advance design, does that mean that those in advance design have already been studied? General MORRIS. The projects have been authorized. The studies are investigating problems and needs to come up with solutions to recommend to Congress or to either proceed or not to proceed. Over half of those studies usually end up in unfavorable reports where we don't recommend solutions. Those 244 are in the pre-authorization stage; the 119 are projects which Congress has authorized and which have been funded for the final engineering and design prior to construction. PAGENO="0450" 444 Senator MORGAN. If I were to ask you to give me a list of the 119 with a very brief summary of each one of them, would you give me a dozen volumes or would it be something that I could digest? General MoRRIs. Sir, there is a list. I have it in a few pages here. I would be glad to let you have that. Senator MORGAN. I would appreciate your making a copy available to me. What I am trying to do is accummulate enough knowledge about what you are doing so that I can be helpful to the chairman and the committee or construct what they are trying to do later on. Senator GRAVEL. Senator Morgan, if I could take this opportunity, we are tentatively scheduling a 3-day investigation of the waterways of this Nation with the Corps. That 3-day physical inspection will probably be the most intensive educational process that a Member of Congress could undergo to know the insides of an agency and what their work is. So I would certainly invite you and assure you that in that 3 days you will be equipped for the rest of your career in working with the Corps of Engineers. Senator MORGAN. Mr. Chairman, in that connection I would like to commend General Morris for his clear and concise summation of the statement this morning. I hope that during those 3 days we don't have to sit here and hear people read statements for 3 days. Senator GRAVEL. No. I can assure you that 3 days won't be that. Let me just explain it in a little more detail. We will take a Corps plane and fly the waterways of the Nation the Missouri and the Arkansas River. It will be a 3-day period of visual inspection, plus continual briefings. Except possibly for a half-day hearing, it will not be a trip devoted entirely to the hearing process. It will be an educational process in the field. I can assure my colleague, and I will repeat it again, you would be more authoritative than most members that have ever passed through this committee. Senator MORGAN. I think it is a good idea. I commend the chairman. I started to say an old time lawyer, but I am not going to put myself in that age bracket yet, but as a lawyer, I always found that I had to view the scene of the crime in order to relate the testimony that I hear. Quite frankly, I have been involved in the State bureaucracies for so long, I come up here and I hear all of this testimony and I am a little lost. General, I would ask you if you would do me one other favor. In addition to giving me a brief summary of maybe those projects that are under advanced design and maybe some of the major projects, if you would have someone prepare me a diagram of the Corps of En- gineers' operations and the chain of command. Do you operate under regions? General MoRRIs. Sir, I would like very much to schedule a briefing for you. I can come over and spend about half an hour of your time. I I would be glad to provide information also. Senator MORGAN. I would like to do that. Maybe at that time we could have-- PAGENO="0451" 445 General MORRIS. Certainly. We would be tickled to death to do that. Senator MORGAN. I would make one other comment, Mr. Chair- man. I am not entirely ignorant of what you are doing, but I would rather you assume that I am than to assume that I know things which I might not. Senator GRAVEL. That is a very fine statement. Most of the time we reverse it and make that mistake. Senator MORGAN. You know, on one occasion when I was practicing law, I was arguing some very elementary points of law before the judge. He interrupted me and told me that I could assume that he knew the elementary points of law. I told him that I had made that mistake once before and I lost my case. So please assume I do not know the elementary points, General. Senator GRAVEL. With that kind of tactic, did you really lose that case? Senator MORGAN. I prefer not to remember that. But I would appreciate your proceeding in this way, General. Then I think I can come back and ask more meaningful questions. Senator GRAVEL. General, the only other thing I would add-we will submit some questions in writing to you because we do want to try to complete a record. We are pioneering. We recognize that. I think you recognize that and are taking that spirit. I would like to deviate briefly from the program here to discuss a bill which I have introduced. As you know, General, in the 1974 Water Resources Development Act, we increased individual project limitations and total funding for several categories of small project authorities. We raised these ceilings in response to inflation. Unfortunately, we did not increase limitations on the 107 program- small navigation projects. The current individual project ceiling in this category is $1 million; this limitation has not been raised for 5 years. I have introduced a bill, S. 886, which would raise this million dol- lar project ceiling to $2 million. The bill would not, however, raise the annual limitation for the entire program, which is currently $25 million annually. Thus we would not be spending more money; we would only be allowing more of the existing authorization to be spent on individual projects. The legislation addresses the fact that a $1 million project 5 years ago cannot be constructed these days for much less than $2 million. I wonder if you could comment on this bill, General. It would have particular value with regard to unemployment, because these small projects can he initiated fairly rapidly and would have a good economic impact in terms of jobs. It would have a particularly bene- ficial effect in Alaska, which has suffered more from inflation than any any other State. We are talking about inflation rates in Alaska of 20 percent in the second largest city and 17 percent in our largest city. This, of course, is as a result of the pipeline. We used to call it cost of living. But now since the Nation suffers the same ill, we call it inflation. General MORRIS. You asked me to comment on the proposal. We last raised that in 1970 from half a million dollars to $1 million for 107. You are correct. We did in the 1974 Water Resource Development PAGENO="0452" 446 Act receive authority to increase several other categories, what amounted to either double or in one case five-fold because of inflation. Those were items which have not been changed for many years. I can only presume that the reason 107 was not included last year was just because it had been raised in 1970. Senator GRAVEL. I was chairman at the time. I will confess it was because I didn't think of it and other members of the committee didn't think of it. It was an inadvertence on our part because had we thought of it I think we would have done it at that point. General MoRRIs. There certainly has been inflation in the last 5 years which detract from the $1 million. Senator GRAVEL. I think the figure is 30 or 40 percent of inflation in the totality of it. So it would not be unreasonable to raise it. Would the corps look favorably or unfavorably upon this type of legislation? General MORRIS. I think it would help the program, sir. We have had a 50 percent inflation in the last 5 years in construction. Senator GRAVEL. Construction has suffered from inflation more than other sectors of the economy? General MORRIS. That is correct. Senator GRAVEL. General, I appreciate that very much. Senator Domenici will have some questions that he will submit in writing. I also will have additional questions that I will submit in writing. [The questions referred to follow:] QUESTIONS FROM SENATOR GRAVEL Question 1. Taking the four major categories of the Surveys portion of General Investigations, Construction, Operation and Maintenance, and Flood Control- Mississippi River and Tributaries, please provide the Committee with an estimate of the amounts which you could use to best advantage in Fiscal Year 1976 to carry out the responsibilities of the Corps civil works program. These figures should be based, not on an optimum budget, but rather oa your capabilities and on your assessment of national needs. Answer. Assuming that there will be favorable action on current supplemental appropriations legislation in Fiscal Year 1975, the Corps capabilities for Fiscal Year 1976 and the 1976 Transition Quarter for the four major appropriation categories are: [In thousands of dollarsl Fiscal year 1976 1976 transition quarter Surveys Construction, general 41,640 11,700 1, 379, 700 520, 000 Advance engineering and design Construction (39, 050) (1, 340, 650) (11, 215) (508, 785) Operation and maintenance, general Flood control, Mississippi River and Tributaries 699, 700 220, 000 199, 900 123, 200 The capability estimates represent the Corps actual program execution ability nationwide for those activities showing the greatest need and investment op- portunities. Question 2. How many unbudgeted new construction starts do you think you could implement in Fiscal Years 1975 and 1976; how much money would be re- quired for such activities? (Individual project listing not required.) Answer. Although there are no new construction starts in the Fiscal Year 1976 budget, we have the capability to initiate eight additional unbudgeteci project~ PAGENO="0453" 447 during the current fiscal year, 32 more during Fiscal Year 1976, and four more during the 1976 Transition Quarter. The additional funding requirements for these would be $27,962,000 for Fiscal Year 1976 and $30,725,000 for the 1976 Transition Quarter. For Advance Engineering and Design, we have the capability to initiate 32 additional unbudgeted new planning projects during the current fiscal year and 39 more during Fiscal Year 1976. The additional funding require- ments for these planning activities would be $7,212,000 for Fiscal Year 1976 and $2,841,000 for the 1976 Transition Quarter. Question 3. Are you funded to your maximum capability in the area of hydro- electric power? If not, please provide an estimate of the additional funding re- quired in Fiscal Year 1976. Answer. We have been emphasizing hydroelectric power in our program because of the energy crisis and, with the funds requested in the budget, we expect to be able to meet power-on-line schedules for all out budgeted construction projects. However, we could still use $24,900,000 in Fiscal Year 1976 for the 18 hydro- electric power projects in the budget which do not have full pcwer-on-line as of 1 January 1975, and an additional $17,707,000 in the 1976 Transition Quarter. These funds would be used far non-power features but could also assure the adequacy of estimates for meeting power-on-line schedules. There also is one project which could use $1,400,000 in Fiscal Year 1976 to initiate construction, with an additional $1,500,000 in the 1976 Transition Quarter. For the Advance Engineering and Design of such projects, we could use an additional $725,000 on eight projects in Fiscal Year 1976. One of these would be a new start. For the 1976 Transition Quarter, an additional $30,000 could be used. Question 4. How many unbudgeted studies do you feel could be profitably under- taken in Fiscal Years 1975 and 1976; how much money would be required? A distinction need not be made between new studies and restudies. Answer. We have the capability to initiate 17 additional unbudgeted surveys during the current fiscal year and 19 more during Fiscal Year 1976. The additional funding requirements for these studies would be $2,718,000 for Fiscal Year 1976 and $843,000 for the 1976 Transition Quarter. Question 5. if you were funded to the extent of your capability in activities you feel are necessary to the orderly continuation of the civil works program (see question one), how much additional manpower, if any, would you require and what additional funding would be necessary? Answer. Our manpower requirements are, of course, dependent upon the type of activities that are to be accomplished, because some are more amenable to contracting than others. For our full capability as previously expressed, we could advantageously use some 3900 additional manpower spaces, of which 2,000 would be Full Time Permanent spaces. The funding for these is already accounted for in our previously discussed capabilities. Question 6. If your program were increased in keeping with your capability, what percentage would go to outside contracting and how much lead time would be required to get such outside forces into gear? Answer. The amount of contracting we do varies with the type of activity. Presently, the estimated percentages for the various program categories are: [In percent~ Government plant and Contracting hired labo Surveys Advance engineering and design Construction, general Operation and maintenance, general 30 30 ~ 45 70 70 ~ 55 These percentages would not change materially if additional manpower spaces are furnished along with funding increases. Otherwise, we would have to rely more heavily on contracting, which would require inefficient realignments of our in-house functions. 50-194 0 - 75 - 30 PAGENO="0454" 448 The lead time for contracting depends on the individual item. Some items are "on the shelf" and are ready for advertising as soon as funds are available. Others would be ready later in the fiscal year. Question 7. What was the total amount appropriated for construction in Fiscal Year 1966, including the construction features of the Mississippi River and Tributaries project? What would this amount be for the Fiscal Year 1976 budget as a consequence of inflation? Answer. The amount appropriated for construction in Fiscal Year 1966 was $1,050,411,500, including $57,132,500 for the construction features of the Missis- sippi River and Tributaries project. Based on the Engineering News-Record con- struction indices, the total amount would have increased to $2,268,889,000 due to inflation during the ten-year budget period. This is a percentage increase of 116%. I would note that this is based on 1 July 1964 and 1 July 1974 indices, which are the price levels used in these two budget years. Question 8. There are $547.7 and $136.9 million dollars for Operation and Maintenance, General, in the Fiscal Year 1976 and 1976 Transition Quarter budgets. How much of this money is for navigation projects? Answer. Of the $547.7 million dollars for Operation and Maintenance, General, in the Fiscal Year 1976 budget, $327,349,000 are for navigation projects. For the 1976 Transition Quarter, $81,207,000 is for navigation. Question 9. During the ten years since the Fiscal Year 1966 budget was devel- oped, what has been the change in the unit cost of dredging? Answer. During the past ten years, the cost per cubic yard of dredging has increased from about $0.25 to about $0.42 for maintenance work. For new work, the figures are approximately $0.50 and $1.00, respectively. QuESTIONS FRoM SENATOR DOMENICI I. GENERAL Question 1. I notice that the budget for general project surveys has been in- creased modestly, to $26,000,000 from $23,900,000. How many studies will be initiated in FY 1976? How many will be continued from FY 1975? Answer 1. The amounts cited are estimated costs for regular studies comprising navigation, flood control and beach erosion studies in Fiscal Years 1975 and 1976. The budget amount for regular studies is $24,295,000 for Fiscal Year 1976 com- pared to an appropriation of $24,557,000 for the current fiscal year. Wnith the funds cited for 1976, we would initiate five regular new surveys and continue with 191 regular surveys, exclusive of the 1976 Transition Quarter. Looking at our regular survey program together with comprehensive and special studies, the amount in our Fiscal Year 1976 budget request is S32,220,000 for six new starts and 208 continuing studies, not including the 1976 Transition Quarter. This compares with $38,724,000 appropriated for Fiscal Year 1975. Question 2. How many authorized surveys have not been initiated? At the cur- rent rate, how long will it take to complete all those surveys? Answer 2. As of 1 January 1975, 247 authorized surveys, including compre- hensive and special studies, have not been budgeted or initiated. An estimated balance of $231,415,400 will be required after the 1976 Transition Quarter to complete the surveys underway and the 247 in the backlog. Without any subse- quently authorized additional studies, about seven years would be required to complete all these studies at the rate of $32,220,000, as requested for Fiscal Year 1976. However, the backlog figure is somewhat misleading because, over the course of time, a number of these studies would probably be combined. Also, in some other cases, local interest in the study is minimal. Question 3. What criteria does the Corps use in deciding which surveys to initiate? Answer 3. In developing the new start objective we inventoried our outstanding study authorities in the 19 water resource regions of the country, including those studies underway as well as those not yet started. Within each region we set priorites based on the following criteria: PAGENO="0455" 449 (a) Where are the most pressing water and related land resources problems that should be addressed within our outstanding authorities. (b) How much local interest was there in a potential study and how much might local interests become involved in the study. (c) What is the relationship between potential new studies and studies currently underway in the same region. Finally we compared unmet needs between regions using the above criteria to select new starts that we judged most relevant for the nation as a whole. Question 4. How will the research budget of $12,500,000 be spent? Answer 4. The budgetary request for FY 1976 of $12.5 million is proposed to be expended in accomplishing applied research in the five areas listed below: Planned Research area: allocation Materials $1, 705, 000 Coastal engineering 3, 730, 000 Flood control and navigation 2, 740, 000 Environmental quality 2,750,000 Water resources planning studies 1, 575, 000 Total 12, 500, 000 II. CONSTRUCTION Question 1. What is the national construction capability of the Corps during FY 1976 and approximately how much employment would be additional capability provide? Answer 1: CAPABILITIES FOR THE CORPS OF ENGINEERS FOR MAJOR APPROPRIATIONS, FISCAL YEAR 1976 [In millions of dollarsj Fiscal year Additional Appropriation title 1976 budget capability Number ~° jobs created by additional capability Construction,general: Construction 1,068.7 272.0 Flood Control, Mississippi River and Tributaries 153. 6 66. 4 0. & M.,general 547.7 152.0 14,700 4, 100 9,400 Total 28,200 1976 TRANSITION QUARTER 1976 transition quarter Additional Appropriation title budget capability Number of jobs created by additional capability Construction, general: Construction 353.8 155.0 Flood control, Mississippi River and tributaries 53.0 70.2 0. & M., general 136.9 63.0 29,000 15,000 13,000 Total 57,060 The overall capabilities shown above are less than the total of individual capa- bilities for individual projects. The totals shown are consistent with our overall Division capabilities. Timely and effective prosecution would require some relief from current manpower constraints, including the addition of some management personnel in Division offices. Question 2. Among the general categories of Corps work, which is the most job- intensive? Answer 2. Generally speaking, maintenance work is more labor intensive, the following is a breakdown by major Appropriation Category for Calendar Year 1975: PAGENO="0456" 450 Job creation effectiveness of the Corps of Engineers civil works program-calendar year 1975 Man- pears per million Appropriation: dollars Construction, general 47 Operation and maintenance, general 53 Flood control, Mississippi River and tributaries 54 Total (Average) 49 Question 3. What is the basis for the Corps priorities that emphasize hydro- electric power, urban flood control, water suppiy, and commercial navigation? How is this priority reflected in the budget? Why has agricultural flood control, for example, not been given equal emphasis? Answer 3. The high priority purposes in our program provide solutions for the most serous National problems, as viewed by the Administration, that can be addressed within the context of the Army Civil Works program. Agricultural flood control may become a higher priority functional purpose in future years if the need for agricultural products continues to increase. Question 4. The 1974 Water Resources Act initiated two new national demon- stration programs: one in streambank erosion control; one in shoreline erosion. Neither program will receive new working funds in 1976. Why have these programs not been funded? Answer 4. Both programs were authorized in the Water Resources Development Act of 1974. These programs were not in the Administration-supported version of the authorization bill introduced in Congress and no funds were included for those programs in the 1976 Budget. However, it should be noted that $2,000,000 was added by Congress for the Yazoo Basin Streambank Erosion Control program in Fiscal Year 1975. Question 5. How many small Projects-ones not specifically authorized by Con- gress-are included in the 1976 construction budget? What is the budget request on these projects? Answer 5. The six Small Project Programs for projects not specifically authorized by Congress were established as individual programs and as such are budgeted on a progam basis. Funds for four of these programs are included in the Fiscal Year 1976 and 1976 Transition Quarter budget requests. These requests are: 1976 Fiscal year transition 1976 quarter Small navigation project program $1, 500, 000 $500, 000 Mitigation of shore damages program 600, 000 150, 000 Small flood control project program 4,000,000 1,000,000 Emergency streambank and shoreline protection program 1,000,000 250, 000 With these funds we propose to accomplish construction on 4 projects in the Navigation Program, 3 projects in the Mitigation Program, 6 projects in the Flood Control Program and an unspecified number of projects in the Emergency Streambank and Shoreline Protection Program. We cannot specify the number of projects in this last program as they are accomplished on an emergency basis as they arise. Question 6. How much money is being allocated to recreational construction work in FY 1976? Answer 6. Approximately $70 million is being allocated to recreation construc- tion work in FY 1976, of which $20 million is for recreation facilities at completed projects. Question 7. We have heard a lot recently about cost-overruns on Federal capital investment projects. I notice that there are a number of projects in the budget that will be virtually complete by the end of FY 1976. These include such areas as the Lytle and Warm Creeks (California) local protection projects; Levee Unit No. 5 (Indiana); Hidden Lake (California); Cochiti Lake (New Mexico); De Gray Lake (Arkansas); the Calcasieu River at Devil's Elbow (Louisiana) PAGENO="0457" 451 navigation project; and Galveston Channel (Texas) Could you provide, for the record, a breakdown on the estimated cost of each of these projects at time of authorization, the estimated final project costs, and an explanation for any discrepancy between the two figures. Answer 7: Project Date of authorization Estimated total cost authorization 1st construe- tion funds (fiscal years) Estimated total cost current Reason for increase Calcasieu River at Devil's Elbow, La Galveston Channel, Tex Cochiti Lake, N. Mex DeGray Lake, Ariz Lytle and Warm Creek, Calif Hidden (Hensley) Lake, Calif Levee Unit No.5, Indiana 1970 1971 1960 1950 1965 1962 1936 4, 118, 000 1,684,000 43, 408, 000 15,000,000 11, 400, 000 13, 658, 000 2,009,500 1975 1973 1965 1962 1971 1971 1963 5, 918, 000 3,665,000 90, 500, 000 66,700,000 36, 180, 000 27, 600, 000 7,705,000 (1) (2) (2) (5) (4) (1) (5) Note: No provision is made in cost estimates for water resources projects for possible future cost increases. 1 Price level increases. Price level increases and increased quantities upon detailed design. Price level increases, added capacity in powerplant, increased dam height and pool level. Price level increases and added area of protection. 5 Price level increases and addition of pumping facilities. Question 8. What specific projects in the budget are included under the 1909 Act authority? What is the total budget request for these projects? Does the Corps intend to await further Congressional clarification before spending these moneys? Answer 8: Budget Budget request request 1976 fiscal year transition Project 1976 quarter Vermilion lock, Louisiana 133, 000 0 Grays Landing lock and dam, Pennsylvania 300,000 130,000 Point Marion lock, Pennsylvania 200, 000 90, 000 Lock and dam 53, (temporary lock), Illinois and Kentucky 21, 100, 000 2, 150, 000 Smithland locks and dam, Indiana and Kentucky 34, 000, 000 14, 885, 000 Cannelton lock and dam, Indiana and Kentucky 620, 000 100, 000 Newburgh locks and dam, Indiana and Kentucky 7, 800, 000 3,928,000 Uniontown locks and dim, Indiana and Kentucky 1, 810, 000 50, 000 Hannibal locks and dam, Ohio and West Virginia 3, 866, 000 Willow Island locks and dam, Ohio and West Virginia 4, 100, 000 600, 000 Totals 73, 929, 000 21, 933, 000 The Corps of Engineers considers the 1909 Act authorization adequate and intends to expend the proposed funds, if appropriated by Congress. Question 9. How much of construction increase from FY 1975 is due solely to inflation? * Answer 9. Construction costs on a nationwide basis have increased rapidly. The Engineering New-Record (ENR) cost index, which we generally use has increased 7.0% from July 1973 to July 1974, which are the index dates used to determine the price levels for the estimates in the Fiscal Year 1975 and Fiscal Year 1976 budgets. However, the ENR index is based strictly on labor and materials costs. It does not take into consideration the various contingency amounts that actual bids include. Contracts have had to increase these contingency figures out of proportion to the rest of the bid due to increasing uncertainties. Fuel costs and material shortages have been a major contribution to these uncertainties. Our cost increases generally exceed the Engineering New-Record index increase this past year due to actual bid experience in each Division area. However, there are signs that the rate of increase has abated somewhat. Question 10. Why are no new construction starts included in the budget? Answer 10. There are no new construction starts requested, since it was decided to apply the maximum possible amount to ongoing construction projects to main- tain as many completion schedules as possible and to enhance employment op- portunities. Continuing projects, on which work is already underway, provide a PAGENO="0458" 452 better opportunity for providing employment quickly. There is a quicker reaction time on our part as well as that of the construction industry. New construction starts generally require a lead time for resolving requirements of local cooperation. Question 11. why is a drop recommended in spending under the heading, Mississippi River Flood Control? Answer 11. The Fiscal Year 1976 request for the Flood Control, Mississippi River and Tributaries, project is slightly less than last year and generally reflects budgetary constraints. However, Fiscal Year 1975 deferral funds released in March 1975 will have the effect of increasing the Fiscal Year 1976 program level. This will also be augmented by repayment in Fiscal Year 1976 of funds tempo- rarily used for Flood Control Emergency work this year. The restored funds will be from appropriations under Flood Control and Coastal Emergencies in Fiscal Year 1976. Question 12. what is the Corps authority to purchase easements in lieu of fee title on land? Answer 12. Unless otherwise directed by the Congress in the legislation author- izing a project, the Secretary of the Army, acting through the Chief of Engineers, may acquire whatever interest in land is necessary to accomplish project purposes. (1) Current Corps regulations govern the acquisition of specific interests in land necessary for both rivers and harbors and flood control projects. (2) In the acquisition of land for reservoir projects, the 1963 Joint Policy of the Departments of the Interior and Army must be followed. (3) For navigation projects, fee interest is acquired in all lands necessary for permanent structures, construction areas, and for recreation and fish and wildlife purposes. In many instances the Government also acquires fee in spoil disposal areas. Permanent easements are acquired for channel improvements, navigation pools and may be acquired for future maintenance areas. Temporary easements may be acquired for temporary disposal of spoil and temporary construction and borrow areas. (4) Acquisition of land for multi-purpose reservoir projects, is governed by the above-mentioned Joint Policy of the Departments of the Interior and Army. This policy provides "fee title is acquired in all lands required for the damsite, construction area, the conservation pool, permanent or multi-purpose pool (excluding flood control) and a band of 300 feet in width above such pool or the top of the flood control pool plus a reasonable vertical elevation above the flood control pool to allow for backwater effects of wave wash, erosion, wind or other factors causing fluctuations in the surface of the water-whichever is greater. Fee title is also required for areas used for recreation; access to the lake; and land acquired for fish and wildlife mitigation and enhancement. Easement interests may be acquired in lieu of fee title for areas in the upper reaches of the project above the fee acquisition lines if financially advantageous to the Government and not required for project purposes. Easements are generally also acquired for rights- of-way for relocation of public highways, public utilities and reailroads." The Corps acquires easements if the Congress directs that easement be acquired in lieu of fee, as in Section 99 of PL 93-251, concerning the Cache River Mitigation Area, which provided an option to the owner of fee or easement acquisition. Generally, the Corps acquires easements in navigation and multi-purpose reservoir projects if acquisition of easements is to the financial advantage of the Government; will serve project purposes; does not violate any condition of the Joint Policy; and is otherwise consistent with established Corps policy. Question 13. Will all the funds deferred under deferrals D 75-81 and D 75-82 be spent in FY 1976? Answer 13. Originally, these funds were scheduled to be released at the start of FY 1976 and would be spent in FY 1976. However, on 12 March 1975, the House of Representatives passed a resolution disapproving these deferrals. Accordingly, the funds were immediately released by 0MB and a significant portion will be used in FY 1975, with the remainder used in FY 1976. Question 14. Would you please describe the scope of the authority of the Corps to reprogram appropriated funds? Answer 14. Reprogramming funds between appropriation categories or major programs is done only with the specific approval of the Administration and the Congress. However, the Appropriations Committees have delegated to the Chief of Engineers the authority to transfer funds among projects in the construction category, not to exceed 15 percent of the amount available for obligation to a PAGENO="0459" 453 project for any fiscal year. An exception permits the transfer of up to 25 percent for projects on which the amount available for the year is $500,000 or less. Trans- fers beyond these limits must be approved by the Appropriations Committees. Transfers between surveys or between Advance Engineering and Design projects may be approved by the Chief of Engineers on a somewhat more liberal basis. Transfers are made only to those surveys and projects which have previously received an approved allocation through the budgetary process. Transfers between operation and maintenance items on completed projects are approved on a case-by-case basis considering the urgency, justification and availability of funds. Question 15. Under what circumstances does a Section 107 navigation project . . . or any other small project authority . . . continue to be authorized even when the Federal cost rises above the statutory limitation of $1,000,000? Phrased another way, under what conditions will the Corps ask the Congress for a specific authorization on a project that had been approved under Section 107? Answer 15. The Corps will not ask the Congress for a specific authorization for a Continuing Authority project that exceeds the Federal cost limitation. In this program, if the estimated cost exceeds the established Federal limitation, we will take one of two possible actions. First, we will inform the local sponsor of the excess cost and determine if they would be willing to pay it. If the local sponsor will assume responsibility for the excess cost, we will approve the project with that condition in the approval. Secondly, if the local sponsor is unwilling or not financially capable of assuming the responsibility for the extra cost, we will not approve the project. If the cost of a project climbs above the Federal cost limitation after the project has been approved and before construction is initiated, we would follow the same course of action. If the local sponsor will accept responsibility for all excess costs, we will proceed with the project on that basis. If the local sponsor will not accept responsibility for the excess cost, the project would be cancelled. The only recourse available to the sponsor under this condition is to request that the problem be studied under normal authorization procedures. PROJECTS COMPLETED UNDER THE 1909 ACT Capacity Replaced Original Replacement Cost of replacement Coffeeville lock and dam, Ala Locks 1, 2, and 3 1-52 ft by 185 ft 1-110 ft by 600 ft_ $21, 597, 264 Holt lock and dam Ala Locks 13, 14, 15, and 16~ - 1-52 ft by 285 ft 1-110 ft by 600 ft_ 28, 100, 000 Warrior lock and dam, Ala Locks 8 and 9 1-52 ft by 285 ft_ 1-110 ft by 600 ft.. 13, 295, 553 Lock and dam 52 (temporary lock) 1-110 ft by 600 ft_ 1-110 ft by 1,200 10, 154, 518 Ohio River, Ill. ft.1 Maryland locks and dam, Ind., Lock and dam Nos. 35 36, 1-110 ft by 600 ft 1-110 ft by 600 ft 62,623, 121 Ohio, Ky. 37, and 38. 1-110 ft by 1,200 ft. Capt. Anthony Meldahl lock and Lock and dam Nos. 31, 32, 1-110 ft by 600 ft 1-110 ft by 600 ft 74, 153, 051 dam, Ohio River, Ky. 33, and 34. Greenup locks and dam, Ky Lock and dam Nos. 27, 28, 1-110 ft by 600 ft 1-110 ft by 600 ft 55, 723, 176 29, and 30. McAlpine locks and dam, Ky Rebuilt dam-added 1 lock; 1-56 ft by 360 ft_ 1-170 ft by 1200 45, 564, 231 utilized 1 lock. 1-100 ft by 600 ft. ft-in use. Belleville locks and dam, Ohio_.... - Lock and dam Nos. 18, 19, 1-110 ft by 600 ft 1-110 ft by 600 ft_ 62, 144, 722 and 20. New Cumberland locks and dam, Lock and dam Nos. 7 and 8. 1-110 ft by 600 ft 1-100 ft by 600 ft 38, 827, 415 Ohio. 1-110 ft by 1,200 ft. 1-110 ft by 1,200 ft. Pike Island locks and dam, Ohio - Lock and dam Nos. 9 10, 1-110 ft by 600 ft_ 1-110 ft by 600 ft_ 56, 601,759 and 11. 1-110 ft by 1,200 ft. Racine locks and dam, Ohio Lock and dam Nos. 21, 22, 1-110 ft by 600 ft 1-110 ft by 600 ft 63, 977, 804 and 23. 1-110 ft by 1,200 ft. Maxwell locks and dam, Mononga- Lock and dam Nos. 5 and 6 1-56 ft by 360 ft 2-84 ft by 720 ft_ 30, 120,000 hela Rivers, Pa. Monongahela River lock and dam Reconstructed existing dam_ 1-56 ft by 360 ft 15, 200, 000 No. 4, Pa. 1-56 ft by 720 ft Monongahela River lock and dam Replaced existing locks 1-56 ft by 362 ft 1-56 ft by 360 ft_ 16, 967, 114 No. 2 (reconstructed), Pa. 1-110 ft by 720 ft Monongahela River, Morgantown Lock and dam Nos. 10 and 1-56 ft by 182 ft 1-84 ft by 600 ft_ 8, 778, 000 lock and dam, W. Va. 11. 1 Lock added to existing structure. PAGENO="0460" 454 PROJECTS UNDERWAY Appro- priation through Replaced Original Replacement July 1974 Total cost Locks and darn 26- Locks and darn 26__ 1-360 ft by 110 ft_ 2-1,200 ft by 110 ft_ $7, 258, 000 Alton, Ill. 1-600 ft by 110 ft Lock and darn 53 (tern- 1-110 ft by 600 ft 1-110 ft by 1,200 ftl 1, 600, 000 porary lock) Ill. and Ky. Srnithland lock and darn, Lock and darn Nos. 1-110 ft by 600 ft 2-110 ft by 1,200 ft.. 78, 188, 000 Ill., Ind. and Ky. 50 and 51. Cannelton locks and darn, Locks and darn Nos. 1-110 ft by 600 ft 1-100 ft by 600 fL 95, 465, 000 lnd. and Ky. 43, 44, and 45. 1-110 ft by 1,200 ft Newburgh locks and darn, Lock and darn Nos 1-110 ft by 600 ft 1-100 ft by 600 ft 87, 137,000 md. and Icy. 46 and 47. 1-llOft by 1,200 ft Uniontown locks and darn, Lock and darn Nos. 1-110 ft by 600 ft 1-110 ft by 600 ft 81, 210, 000 Ind. and Ky. 48 and 49. 1-ilOft by 1,200 ft Hannibal locks and darn, Lock and darn Nos. 1-110 ft by 600 fL 1-110 ft by 600 fU 74, 184, 000 Ohio and W. Va. 12, 13, and 14. 1-110 ft by 1,200 ft Willow Island locks and Locks and darn Nos. 1-110 ft by 600 ft 1-110 ft by 600 fL 58, 739,000 darn, Ohio and `N. Va. 15, 16, and 17. 1-110 ft by 1,200ft $383, 270, 000 19, 400, 000 192, 197, 000 99, 040, 000 94, 802, 000 95, 806, 000 88, 825, 000 75, 815, 000 I Lock added to existing structure. A.E. & D., FISCAL YEAR 1975 Planning funds allocated through Replaced Original Replacernent July 1974 Total cost Vermilion lock Verrnilion lock - 1-1,182 ft by 56 ft~ 1-1,200 ft by 100 ft $642, 000 $10, 111, 800 Grays Landing lock and darn, Pa Lock No. 7 56 ft by 360 ft 1-84 ft by 720 ft~_ 100, 000 45, 800, 000 Point Marion Lock, Pa Lock No. 8 56 ft by 360 ft 1-84 ft by 720 ft -- 75, 000 29, 800, 000 III. OPERATIONS AND MAINTENANCE Question 1. How much is the backlog in Corps Operation and Maintenance work? Answer 1. The most recent estimate of backlog in Operation and Maintenance work is $286 million. Question 2. How is the Operation and Maintenance backlog divided among various types of work? Answer 2: Dredging $152, 800, 000 Jetties and breakwaters 46, 000, 000 Mooring facilities 2, 600, 000 Locks, dams, multiple purpose w/power 43, 300, 000 Bank stabilization and erosion control 15, 500, 000 Recreation areas 400, 000 Roads and parking areas 9, 300, 000 Clearing and snagging 1,600,000 Boundary monumentation 11, 000, 000 Miscellaneous work and equipment 3, 500, 000 Total 286, 000, 000 Question 3. What are the most job-intensive types of Operation and Mainte- nance work? Answer 3. Of the above listed categories the most job-intensive work lies in the areas of dredging, lock and dam structures, bank stabilization and erosion con- trol, recreation, roads and parking, clearing and snagging. Question 4. Provide a breakdown on navigation costs for FY 75, FY 76, and the 1976 Transition Quarter on the following components of the inland waterway system; the Mississippi River, the Ohio River, the Great Lakes, the Atlantic- Gulf Intracoastal Waterways, the Columbia River, and others. PAGENO="0461" 455 Answer. The O&M estimated navigation costs for FY 75, FY 76, and the 1976 Transition Quarter for inland and intracoastal waterways are as follows: Fiscal Year 1976 "1" Qtr 1975 1976 Alabama River Allegheny River Apalachicola, Chattachoochee and Flint Rivers Arkansas River Atlantic Intracoastal Waterway Black Warrior and Tombigbee Rivers Cape Fear River above Wilmington Columbia River Cross Florida Barge Canal Cumberland River Delaware River, Philadelphia to Trenton Fox River Great Lakes-Regular Great Lakes-Diked Disposal Green and Barren Rivers Gulf I ntracoastal Waterway Illinois Waterway Intracoastal Waterway, Caloosahatchee to Anclote Intracoastal Waterway, Jacksonville to Miami Kanawha River Kaskaskia River Kentucky River Lake Washington Ship Canal Mississippi River Misso sri River Monongahela River Ohio River Okeechobee Waterway Ouachita and Black Rivers Tennessee River Willamette River at Willamette Falls $1,232,000 1, 561, 000 3, 164, 100 14, 323, 800 4, 845, 700 3, 151, 700 445, 500 2, 445, 100 426, 300 2, 262, 900 1, 526, 000 793, 800 16, 430, 000 15, 196, 000 689, 700 10, 373, 400 6, 625, 600 200, 000 995, 000 1, 701, 000 632, 300 1, 402, 300 2, 673, 000 22, 424, 500 12, 634, 100 3, 344, 300 15, 344, 300 693, 100 1, 480, 000 2, 733, 100 222, 700 $2,752,000 1, 825, 000 5, 517, 000 15, 594, 400 4, 989, 000 3, 757, 000 440, 000 2, 481, 700 474, 000 817, 600 1, 759, 000 1, 208, 000 18, 678, 000 23, 000, 000 745, 000 12, 941, 000 7, 887, 000 223, 000 824, 000 1, 886, 000 1, 083, 000 1, 529, 000 1, 520, 000 21, 302, 000 15, 791, 000 3, 988, 000 16, 850, 000 709, 000 2, 885, 000 2, 934, 000 270, 000 $688,000 1, 037, 000 1, 304, 000 4,000, 300 1, 123, 000 902, 000 110, 000 610, 900 119, 000 229, 900 677, 000 443, 000 7, 233, 000 4,821,000 161, 000 2, 385, 000 1, 560, 000 56, 000 206, 000 500, 000 430, 000 436, 000 425, 000 4, 475, 000 5, 025, 000 1, 097, 000 4, 872, 000 177, 000 961, 000 775, 000 75, 000 Total 151, 972, 300 176, 659, 700 46, 914, 100 Senator GRAVEL. I would like to turn the hearing to the chairman of the full committee, Senator Randolph, who I think would like to address you on this subject with greater expertise than any of us have exhibited. So we turn you over to our dear chairman, as I say. Senator Ran- dolph, the floor is yours. I must absent myself because we have pres- sures similarly in the Finance Committee. Thank you. STATEMENT OP HON. JENNINGS RANDOLPH, U.S. SENATOR PROM THE STATE OP WEST VIRGINIA The CHAIRMAN. Thank you. I understand the pressures. Thank you, Mr. Chairman. I will ask unanimous consent that the opening statement I had pre- pared be included in the record. [The statement follows:] STATEMENT OF HON. JENNINGS RANDOLPH, U.S. SENATOR FROM THE STATE OF WEST VIRGINIA For more than 150 years the government of the United States has been deeply involved in developlng and managing the water resources of our country. This history makes the programs of the Army Corps of Engineers one of the oldest areas of Federal concern in our national life. The Corps of Engineers, in carrying out its civil works responsibilities, has one of the largest and most widespread programs in our country. Water and the many uses to which it is put are essential to our continuing development and prosperity. PAGENO="0462" 456 it follows, therefore, that there must be a substantial public investment in water resources. Our needs are great; but our resources are not unlimited. Under these circum- stances it is incumbent on us to carefully examine our water resources develop- ment programs. Since these programs usually require long-term financial com- mitments, it is particularly important that we give proper attention to project planning. This continues to be an important part of the work of the Committee on Public Works. Under provisions of the Congressional Budget Act of 1974 we now have the added responsibility to review the annual spending request of the Corps of En- gineers so that we may advise the Senate Budget Committee of its effect on the water resources program and the Federal budget as a whole. Today's hearing has been scheduled to begin such a review and is the last in a series of hearings that has brought before us the agencies whose activities fall under our legislative jurisdic- tion. I am a firm believer in the importance of water resources programs to the well- being of our country. But I am equally committed to the belief that we must guard the taxpayers' dollars jealously and insure the maximum return is obtained from their expenditure. The CHAIRMAN. In your budget submission for 1976, a request is made, as I understand it, for $547 million for operation and mainte- nance. That is a 100 percent increase over the level requested in fiscal year 1966. That is a very dramatic increase of course. Do you think of that as caused by inflation, General? General MORRIS. It is caused by several factors, sir. Certainly infla- tion is a large part of it. In the last 10 years inflation would account for the bulk of that increase. But during that period we have also added to the system some major works, such as the Arkansas River Navigation Project which has been completed and put into the system. During the last 10 years, I estimate roughly that we have added some 80 new major reservoirs, which increased the maintenance requirements. So I think there is really more than just inflation. There is a large increase in the base which we must maintain. The CHAIRMAN. Then there is a partial attributing of the increased costs to the inflation and there are other reasons. In this connection, as I think of the navigation and harbor system as it was authorized here in the Congress and as it has been brought into being by the Corps of Engineers, has it become too expensive to maintain? General MoRRIs. No, sir. It is expensive to maintain. The CHAIRMAN. Are there any new techniques that can be used for providing adequate water transportation systems should you ever defer these programs that we have maintained in our waterway system? General MORRIS. Sir, I would like to approach that two ways. One is that the total amount of maintenance dredging today is not signifi- cantly different than it has been. We have been dredging somewhere in the neighborhood of 250 million to 300 million cubic yards of material for some time. So I don't really see that the gross amount of work has increased. Therefore, we should not presume it is too expensive to do. Secondly, the economics associated with operating our waterways are so much in favor of the system itself that the maintenance costs are certainly within the realm of what the system should be expected to carry. PAGENO="0463" 457 As far as techniques are concerned, we can reduce to some extent the maintenance costs, the amount of dredging and material to be removed by tributary runoff controls such as the Soil Conservation Program, and by training structures in the rivers. We haven't dredged the Missouri River above Omaha now for 7 or 8 years because it is a self-cleaning river. We can reduce the cost by our bank stabilization processes in the lower Mississippi River. One maintenance cost is associated with water quality. As we learn more about what is in dredged material, the expensive dike disposal systems that we have been building probably can be reduced. There would be savings there. The other side of the coin is I am personnally of the opinion that dredged material is a national asset that has an intrinsic value that should be saleable, for landfill, for highway approaches, embankments and building wetlands and a lot of other things. We have looked upon the costs associated with maintaining our waterways as an investment with no return. I. think we are on the wrong track there to some extent. The CHAIRMAN. Have you explored that with the subcommittee? General MORRIS. Yes, sir. This study, that we are doing at the Waterways Experiment Station now, this 5-year, $30 million dredged material research program is a very exciting and promising under- taking. For example, we have already determined how to put about twice as much material in a disposal area. On the surface that may not seem like much but it is a significant reduction. Our analyses have already allowed the Environmental Protection Agency to remove five disposal areas on the Great Lakes from those which require dikes because the material is no longer as polluted as we thought it was and, therefore, it can be put in open areas. That is a saving. We have learned how to build wetlands and to build wildlife, migratory wild fowl areas. I just think that this study is only 2 years old. it should be fully funded to expeditious completion because it is paying its way every day that we go through it. The CHAIRMAN. General Morris, you open a very creative area which I think 1 want to check into more and more. Of course, West Virginia has been called the mother of rivers. But we only have two rivers actually in the State that are navigable rivers from the stand- point of transportation of products. They are the Monongahela and the Kanawha. The Ohio, of course, separates a couple of States. So 1 don't use the Ohio. But I do use the Monongahela and the Kanawha Rivers with West Virginia on both sides. For example, I am told the Ohio River is cleaner today than it was 5 years ago, or 10 years ago. Is this true? General MORRIs. In my personal opinion, I believe that is correct, from the standpoint of pollutants, not sediments. I would suspect that from a water quality standpoint it is cleaner. I would suspect that materials being deposited may be somewhat increasing because of materials running off from the landscapes work and strip mines. The CHAIRMAN. The reason I mentioned that, is that I have seen people fishing for game fish in the Ohio River near Weirton. I have seen them fishing for game fish almost alongside the capitol building in Charleston, in the Kanawha River. PAGENO="0464" 458 I have asked and they have told me about the better quality of the water. You carry on the programs, as you say, of dredging or whatnot, to aid navigation. But still the stream from the standpoint of pollution becomes cleaner. Is that right? General MORRIS. I believe that is correct, sir. I think that is gen- erally true. The CHAIRMAN. So one doesn't work against the other? General MoRRIs. No, sir. Our problem of maintaining the water- ways is usually the materials reducing the navigable depths, which fill up the bottom. We have to take the material out. As far as quality is concerned, I think you are absolutely right. It is not necessarily true that all dredged material is polluted. The fact is, the more we look into it, that it is proving to be an erroneous assump- tion, that most dredged material is not polluted. The CHAIRMAN. I had understood so. I wanted that in the record. If we study your budget we notice that 265 harbor and channel maintenance and operation projects are to be undertaken at a cost of $240 million while 224 flood control projects will be operated and maintained at a cost of $73 million. That channel and harbor maintenance program indicates that that type of work is much more expensive than the flood control mainte- nance. Do you want to enlarge on that? General MORRIS. Yes, sir. I think those numbers one against one are a little misleading because some of those navigation maintenance harbor and channel projects are extensive. It will be many, many miles of river, or a major harbor, such as New Orieans, as opposed to a single reservoir. I don't find those numbers surprising. The CHAIRMAN. What do you foresee as the continuing cost of the review for deauthorization studies required by section 12 of the Water Resources Development Act of 1974? General MORRIS. Beginning in fiscal year 1977, the continuing cost of conducting reviews of projects for possible deauthorization will decline to about $100,000 to $150,000 per year based on current esti- mates. This level of funding will permit a review of approximately 20 to 30 projects per year after the initial 3-year period, during which we anticipate completing reviews of about 570 projects. The CHAIRMAN. Will this deauthorization requirement prove meaningful in eliminating projects which are no longer feasible or necessary after your first experience with the procedure? General MORRIS. Yes, sir. The CHAIRMAN. Have all States commented on the first proposed list for deauthorization and when will it be submitted to Congress? General MORRIS. As of February 26, 1975, the date the Chief of Engineers submitted his recommendations to the Secretary of the Army, 24 of the 44 States, and the District of Columbia had com- mented on the Chief of Engineers' list of projects proposed for de- authorization. No comments have been received from 20 States, Puerto Rico, and the Virgin Islands. The Secretary of the Army will transmit the Chief of Engineers' recommendations to Congress after completion of his review and coordination with the Office of Manage- ment and Budget. Congressional delegations affected by the recom- mended deauthorizations will be individually notified by the Chief PAGENO="0465" 459 of Engineers prior to the submittal of the report to Congress, as pre- scribed by section 12. The CHAIRMAN. How many comprehensive river basin studies are not being funded in fiscal year 1976? Are those not being funded complete? General MoRRIs. Funds for corps participation in new compre- hensive river basin study starts in fiscal year 1976 are included in the budget of the Water Resources Council (WRC). Four previously funded comprehensive basin studies are not included in our current budget request. They are: Big Muddy River basin authorization report, Illinois; Long Island Sound region, Connecticut and New York; Platte River basin, Nebraska; southeastern New England region, Massachusetts, Connecticut, and Rhode Island. ~unds in fiscal year 1975 provided for completion of corps par- ticipation in the WRC-sponsored interagency studies of Long Island Sound, Platte River basin and southeastern New England regions. Funds for authorization studies on elements of the interagency plan which fall within corps water resources developmental responsibilities will be requested in subsequent fiscal years following completion and review by WRC of the interagency study and plan. Funds in fiscal year 1975 for the Big Muddy authorization report were expended for public involvement in the early phase of the study. Further study has been suspended because it appears at this time that economic justification and local support are lacking. The CHAIRMAN. General Morris, this is the conclusion not only of this hearing, but of this series of hearings with the various agencies in connection with our budget hearings. We appreciate the cooperation of the Corps of Engineers and your associates in being here today and I am sure explaining, clarifying, helping us to understand the commitment that you have as an agency and the problems that you have in funding. Thank you very much. [Whereupon, at 11:15 a.m., the committee recessed, to reconvene subject to the call of the Chair.] [General Morris' complete statement follows :} PAGENO="0466" 460 5 March 1975 STATEMENT OF MAJOR GENERAL J. W. MORRIS DIRECTOR OF CIVIL WORKS OFFICE OF THE CHIEF OF ENGINEERS Department of the Army BEFORE THE SENATE COMMITTEE ON PUBLIC WORKS FISCAL YEAR 1976 AND 1976 TRANSITION QUARTER PROGRAM Mr. Chairman and Members of the Committee: I am pleased to appear before you today to discuss the U.S. Army Corps of Engineers Civil Works program and our budget requests for Fiscal Year 1976 and the 1976 Transition Quarter. As a result of the Congressional Budget Act of 1974, this is the first time that testimony involving overall program and budgetary matters is being presented before this Committee. I consider this an especially important appearance because it brings together and into clearer perspective the three key ingredients in developing and achieving a program of national importance. These ingredients are authority, means, and execution. Simply stated, the Congress, in speaking for the people of the country, decides what national needs are to be satisfied and then it provides the Executive Branch with the authority and means to fulfill these decisions. Quite obviously, the clearer the authority is and the greater the means are, the more responsive the execution should become. The means, which we are to discuss today, most often become the key element in the Executive's ability to fulfill his responsibilities under the authorities given him by the Congress. At the same time, there are numerous cases where means are withheld or, if available, they are unused because the authority is cloudy. PAGENO="0467" 461 I will start by commenting briefly on the Civil Works mission and program trends. Then I will cover the development of the fiscal year budget,discuss the optimum budget, and conclude with a discussion of the impact of certain authorities on the immediate and long range appropriation levels and process. PAGENO="0468" 462 ***CIVIL WORKS MISSION AND TRENDS*** As you well know, the Corps is vitally involved in the development and management of the Nation's water and related resources. This mission, which is national in scope, began early in the nineteenth century with an initial focus on providing improvements for navigation. Under successive mandates from the Congress, the mission has grown to encompass all of the water resources functions important to our modern society. Nowadays, our water resources development and management activities generally progress through four functional phases, namely, planning, engineering and design, construction, and finally, operation and main- tenance. Legislatively, however, this process begins with study authorization, and progresses through project authorization, monetary authorization, and appropriations. This Committee, of course, is vitally involved in the first three of these four legislative steps. And it is now becoming involved in the fourth step. INVESTMENT PROGRAN Putting together a budget each year and executing the Civil Works program is not a random operation that starts anew each year. It is based on an investment program for the coming five years. It is a moving five-year program which is revised annually. The program is based on an analysis of water resources needs in the 19 water PAGENO="0469" 463 resource regions and on the objectives of the Corps of Engineers in each region. The goal is to meet approximately the same proportion of the highest priority needs of each region within our authorized missions and realistic dollar constraints. For fiscal Year 1976, the five-year investment goal was set at $5.5 billion. Project eligibility criteria is stringent to assure that the best water resources investment opportunities are being included. PROGRAM TRENDS Our water resources development policy recently has been subjected to the influence of a number of major forces which produce new program directions. These forces include the energy crisis, environmental considerations, the new Principles and Standards, the greater competition for Federal investment funds, and significant policy issues such as cost sharing and user fees. These new directions are taking place and, in fact, are intensifying as a result of the Water Resources Develop- ment Act of 1974. Here, again, this Coimnittee has played a vital role. This legislation, in my view, has not only opened up new areas of endeavor, but will have continuing long-range impact on the future thrust of water resource development and management policies. 50-194 0 - 75 - 31 PAGENO="0470" 464 ***BUDGET DEVELOPMENT AND THE FT 1976 BUDGET*** The means to implement and execute the program policies are money and people. These are acquired through the budget process which I will now discuss briefly, along with the appropriation structure and the Fiscal Year l~76 budget. INITIATING INSTRUCTIONS The budget process starts about 16 months before the beginning of the fiscal year being budgeted. It is initiated by general instructions from the Office of the Chief of Engineers to the Division offices. These instructions outline new investment guidance, ongoing investment priorities, and total budget assumptions. Division Engineers respond in about four months. Their reports are analyzed and reviewed to develop an integrated and balanced nationwide program within an assigned budget constraint initially received, along with other guidance from 0MB during the interim four months. The Secretary of the Army and his Civil Works staff play an important role in setting priorities, identifying program opportunities, and in the final budget review. APPROPRIATION STRUCTURE Before discussing the budget, I believe that a few words on the Appropriation Structure would be helpful. There are four major and four minor separate Appropriation Titles. Seven of the eight are functionally oriented while the Flood Control, Mississippi River and Tributaries,Appro- priation Title is geographical. PAGENO="0471" 465 Major Appropriation Titles The major appropriation titles are General Investigations; Construction, General; Operation and Maintenance, General; and Flood Control,- Mississippi River and Tributaries.- All of these provide for "no year" funding, that is, the amounts appropriated remain available until expended. The General Investigations appropriation supports the studies which seek solutions to water related problems and needs, research and development, and other "software" outputs and services requiring the technical expertise of the Corps. Construction, General, as the name implies, covers the "hardware" output of the Corps. It includes the separately identified Advance Engineer- ing and Design which finances the planning required prior to construction. This appropriation also funds construction, the major rehabilitation of some completed projects, and a variety of smaller program activities. Operation and Maintenance, General, provides funds to operate completed projects and to assure that they are maintained in a safe and effective condition. The Flood Control, Mississippi River and Tributaties, Appropriation includes all of the previously mentioned functions but is geographically limited to the Lower Mississippi Valley from Cairo, Illinois, to the Head of Passes of the Mississippi River, below New Orleans. Minor Appropriation Titles Minor Appropriation Titles include Flood Control and Coastal Emergencies; General Expenses; Special Recreation User Fees; and Permanent Appropriations. PAGENO="0472" 466 Only the General Expenses funds revert to the Treasury unless obligated within the fiscal year. The Emergency Appropriation permits the Corps to undertake flood fight and disaster relief operations, including repair of flood damaged flood protective works, and to provide emergency water supplies in certain situations. In the event of emergencies, any funds appropriated for flood control activities under other appropriation titles can be diverted to this activity with subsequent reimbursement to these appropriations when emergency funds are appropriated. The General Expense Appropriation funds the salaries and other costs for the Civil Works staff of the Office of the Chief of Engineers and our Division Offices. Special Recreation Use Fees allow fees collected at Army Corps of Engineers recreation facilities to be available for operation, maintenance, and improvement of such facilities. Permanent Appropriations return to local governments 75 percent of the fees collected by the Corps for the lease of Federal project lands to private interests. They also permit the use of amounts collected by the Federal Power Commission from private power companies for use of hydraulic head created by Federal projects and for the fees collected from the regulation of hydraulic mining in California. PAGENO="0473" 467 Fl 1976 BUDGET REQUEST I will now discuss the budget request for Fiscal Year 1976 and the 1976 Transition Quarter. General Rationale Inflation is still a serious problem, but even more critical in our current economic situation is the high rate of unemployment, which has created a pressing need for effective Federal action. There are no new construction starts in this budget. Continuing projects, and those in the maintenance stage, offer a greater opportunity for putting people to work immediately, since we can award contracts this spring and summer and continue them with Fiscal Year 1976 funds. New - construction projects, on the other hand, could not normally be started until the spring of 1976, and, therefore, would be less effective in coping immediately with the needs of the current unemployment crisis. However, the budget request for Fiscal Year 1976 does include funds for initiation of six new survey investigations and 14 new planning starts, which will increase our construction capability in future years. PAGENO="0474" 468 ~~get Summary Table I have a table breaking down the budget into the eight Appropriation Titles, and comparing Fiscal Year 1975 with Fiscal Year 1976. I will not read these details to you, but will include it in the record. However, I will discuss briefly the major individual budget requests. (Dollars in Thousands) Fiscal Year 1975 Fiscal Year 1976 1976 Transition Appropriation Title 4ppropriation Budget Quarter Budget General Investigations 65,284 62,200 15,550 Construction, General 973,681 1,092,700 360,000 (22,379) (24,050) (6,215) Construction (951,302) (1,068,650) (353,785) Operation and Main- tenance, General 446,577 547,700 136,900 General Expenses 38,800 42,700 10,675 Flood Control, MR&T 161,948 153,600 53,000 Flood Control, Coastal Emergencies 15,000 40,400 3,750 Special Recreation Use Fees 700 1,900 - Permanent Appropriations 3,825 4,500 1,102 GRAND TOTAL 1,705,815 1,945,700 580,977 Overall Budget The budget amount in the President's Fiscal Year 1976 Budget is $1,945,700,000. Together with the $58,448,000 which was deferred from Fiscal Year 1975, the budgeted program is slightly over $2 billion, the PAGENO="0475" 469 largest annual dollar program for Army Civil Works ever submitted to Congress. This compares with a Fiscal Year 1975 appropriation to date of $1,705,815,000, which was reduced by the deferral amount to a program level of $1,647,367,000. The net increase of $356,781,000 in program Levels is primarily distributed between the Construction, General, and Operation and Maintenance, General appropriations. Of the increase, $206,909,000 is for Construction and $101,123,000 is for Operation and Maintenance. These comparisons exclude a requested Fiscal Year 1975 Supplemental Appropriation for Federal pay raises, totaling $14.3 million for the General Expenses and Operation and Maintenance, General, appropriations. The budget request also includes our requirements for the 1 July to 30 September 1976 Transition Quarter. The amount requested for the Transition Quarter totals $580,977,000, and provides for continuation of the Fiscal Year 1976 program with no additional survey or project starts. It will accomodate our ongoing construction activity which, for this period, coincides with a favorable construction season. General Investigations and AE&D The General Investigations request will permit substantial progress. We will undertake six new studies and we hope to complete 25 with the funds requested, including four urban studies. For the past several years we have been successful in increasing the dollars per study to accelerate their completion. This trend is now leveling off. I would hope,therefore, that the amount of money for each traditional study can be increased in the future. In furthering our philosophy of putting the money on the best investment opportunities, we will complete advance engineering and design on 35 projects and initiate 14 new ones with the funds requested. These PAGENO="0476" 470 35 projects will join 52 others which will have had design completed by the end of Fiscal Year 1975. Construction The Construction budget request for Fiscal Year 1976 includes a substantial increase over the request for the past two years. There are no new construction starts recommended since an objective for the Fiscal Year 1976 budget is to put the money of those projects which can produce the quickest positive results for the nation's economy, in other words, ongoing construction. We are giving particular priority to projects nearing completion so that their benefits can be realized more quickly. Operation and Maintenance In the past several years we have mentioned a growing maintenance backlog. Admittedly, this backlog was based more upon an awareness of the problem than our ability to identify it in specific terms. Our concerns materialized in Fiscal Year 1975 as a result of a culmination of events during calendar years 1972, 1973, and 1974. These events accelerated the criticality of certain features of the backlog and specifically challenged our ability to maintain and operate our waterways and harbors. Starting with AGNES in 1972, the Mississippi Floods of 1973 and 1974, the loss of a dredge in Galveston Bay, plus other emergencies in our navigable areas, we were able to predict that by the end of Fiscal Year 1975 there would be a shortfall of maintenance funds which may cause as many as 50 harbors and over 100 waterway locations to be less than authorized dimensions. PAGENO="0477" 471 We have been working hard to use every dollar available and have been successful in keeping the problem under some degree of control. The Fiscal Year 1975 supplemental before Congress now provides a mechanism for resolving the problem for the rest of Fiscal Year 1975. The point I need to make here, however, is that the criticality of the maintenance dredging problem has iiifluenced the Fiscal Year 1976 budget several ways. First, part of the increase in that budget will be used to reduce the maintenance dredging backlog. Also, we are asking for approval of major improvements in our existing dredge fleet. And finally, I am taking this opportunity to advise you that the National Dredge Study, which Congress directed, is now under review by the Secretary of the Army and the 0MB. Before leaving Operation and Maintenance, I would like to add that maintenance dredging is only one element of the maintenance backlog. It happens to be the first of those elements which have been deferred a sufficiently long time to reach the point of criticality. There are several other elements which are approach- ing the same conditiot~\ Summary Views on Budget In conclusion, we feel that the Fiscal Year 1976 budget represents a high intensity, production oriented program which is designed and has the capability of producing the most immediate good and benefit for today's economic situation while providing necessary long term water resources development. In the Bicentennial year of our Nation's history, I believe that the Corps of Engineers will be able to continue its historic role of nation building, while still being responsive to current national priorities. PAGENO="0478" 472 ~* THE OPTIMUM BUDGET*** A matter of interest in all budget discussions and deliberations is the optimum level of funding. This, of course, is somewhat theoretical and the levels of funding must, of necessity, be the result of Federal policies and priorities. I will discuss an optimal program primarily from the Civil Works point of view. I will then say a few words concern- ing the related matters of program reduction and expansion. OPTIMUM PROGRAM There are two major aspects of our program which need to be considered insofar as optimizing the program is concerned. The first is the fulfillment of public needs and the rate at which these are met. The second is program efficiency. Public Needs The first of these, that is, public needs, is not a fixed, or static, requirement. It changes over time in response to such dynamic forces as population growth, economic development and patterns, and public desires. It also is influenced by changing National policy regarding the Federal interest in water resources programs. Over the years, it has taken on new areas of interest such as in water supply, water quality, and non-structural flood damage reduction. More recently, we also have the increasing emphasis on project functions which contribute PAGENO="0479" 473 to a reduction of the energy problem. There also is the matter of the degree of Federal interest, as evidenced by cost sharing policies. Although all these factors contribute to the dynamic nature of the program, the fulfillment of public needs and the rate at which this is accomplished is probably best evidenced by the current status of the program. We currently have a growing backlog of authorized new work and also of maintenance at completed projects, which I will discuss in a few minutes. Program Efficiency The other major aspect I mentioned, the efficiency of the program, is concerned with maintaining an efficient financial operation, but it also could be viewed as another facet of the rate of fulfilling public needs. An efficient financial operation makes the best use of the fiscal and manpower resources available. I believe we do this quite well within our given circumstances, and we are constantly striving to improve the efficiency of our operation. Further efficiencies could problably be achieved with more uniform and more predictable budgets and with some innovative approaches to early and long term financing of projects after authorization. Regarding efficiency as it relates to the rate of fulfilling public needs, justified water resources developments that are delayed are fore- going benefits that could be accruing to the economy. The Civil Works program also contributes to the general economy by providing employment opportunities during periods such as we are now experiencing. I will say more on this in a few minutes. PAGENO="0480" 474 Five-Year Programming Obviously, there is no one answer to the problem of optimum level of funding. Clearly, it must be adequate to achieve the desired results and preferably it should be reasonably predictable. In this regard, we are working on developing a more responsive, integrated five-year programming system. Five-Year Proj ections Estimated projections at the tine of the President's Budget preparation consisted of $2.2 billion for Fiscal Year 1977, $2.2 biUion for 1978, $2.1 billion for 1979, and $2.0 billion for 1980. These figures are based on July 1974 price levels, which are used in the Fiscal Year 1976 budget. The totals include $71 million for General Investigations in Fiscal Year 1977, rising to $83 million in 1980. This compares to $62,200,000 in the Fiscal Year 1976 budget. The increases through 1980 generally reflect increasing complexities in the program rather than growth. For Construction, General, the projection increases to $1,275,000,000 in Fiscal Year 1977 and 1978, and falls to $975 million in 1980. This. provides for an orderly continuation of the projects underway with the $1,092,700,000 requested for Fiscal Year 1976. The projections fall to $975 million in 1980 because they are based on the assumption that no new construction projects would be initiated during the period. PAGENO="0481" 475 Projections for the ongoing Mississippi River and Tributaries Project increase from $150 million in Fiscal Year 1976 to $175 million in 1977, with gradual increases thereafter to $215 million in 1980. These amounts reflect the continuing need to control this dynamic river which endlessly attacks its banks, to protect the investments already made, and to complete the project in a timely manner and thus develop its full benefit potential. For Operation and Maintenance, the projections increase gradually from $561 million in Fiscal Year 1977 to $618 million in 1980. Using the $547.7 million in Fiscal Year 1976 as a base, the increases reflect new projects coming on line and a very slight allowance for the aging of existing projects. PROGRAM REDUCTION OR EXPANSION In discussing the optimum level of funding, I indicated that the Civil Works program had a backlog of work, construction as well as maintenance. Due to these backlogs, I do not foresee that this program can be reduced if we are to continue to perform the missions that are assigned to us by law. Unfortunately, however, the ~rogram's responsiveness to public needs has been diluted owing to the impact of inflation on the dollars available for Civil Works activities. I also might note that the percentage of the Federal budget allocated to this program has been shrinking. The potential for expansion in the program is evidenced by the backlog of unaccomplished work. Moreover, the increasing complexity and scope of the program to meet the continuing needs of the people and PAGENO="0482" 476 the economy suggest that a potential for expansion will remain over the foreseeable future. Backlog Our construction and maintenance backlog is of growing concern. We have 336 active authorized projects awaiting initiation of construc- tion, although a number of these are in the planning stage. The total estimated Federal cost of these projects is $10.7 billion, Increased cost of operation and maintenance over the past several years has resulted in the accumulation of deferred maintenance of harbor and channel dredging and in structural maintenance and repair of navigation and flood control projects. At the present time, this deferred mainten- ance work amounts to $290 million, of which about half is dredging. To date we have been able to maintain necessary depths in most of the major harbors; however, in some cases it has been necessary to maintain the channels at reduced widths. Potential for Stimulating the Economy Since we have a backlog, the Corps has a current capability to stimulate the economy. The ability of the program to produce employment is indicated by a recent analysis of the Calendar Year 1975 program furnished to the Secretary of Commerce and the Secretary of Labor, in response to the Emergency Jobs and Unemployment Assistance Act of 1974. This analysis revealed that the program will utilize 100,000 man-years of labor, consisting of 32,000 man-years covered by estimated direct labor costs for Government employees and 68,000 man-years of PAGENO="0483" 477 on and off-site employment in the private sector. This represents an aggregate of about 49 man-years per million dollars. Our responses to the Secretary of Commerce and the Secretary of Labor regarding our capability to perform work under Title III of the Act indicated it to be $137.8 million. Of this total, $114.7 million would be for project operation and maintenance and $23.1 million for construction of recreation facilities at completed projects. The funds could be obligated when made available and the work initiated with a maximum lead time of 30 to 40 days and completed within one year. This work represents a potential for employing some 19,300 people for a total of 11,300 man-years. This amounts to 82 man-years per million dollars, which is higher than our regular program because the type of work involved is more labor-intensive. Deferrals There are only $108,000 of appropriations prior to Fiscal Year 1975 which are deferred. However, other funds which will be available soon, at the beginning of the fiscal year, and will contribute to producing employment, include the $58,448,000 of Fiscal Year 1975 construction funds deferred by the President to combat inflation. The overall effect of this deferral program has not been serious because 0MB has permitted transfers to be made to projects in the deferral program where necessary, without reducing the total amount in deferral. Perhaps the most significant impact of the deferral is that it delays the award of some construction contracts to the end of the fiscal year, whereas they might have been awarded earlier. PAGENO="0484" 478 ***fljpA('f OF AUTHORIZATIONS ON APPROPRIATION5*** Having discussed the budget process, the budget itself, and optimum budget parameters, I now would like to say a few words about authorizations and their impact on appropriations. MONETARY AUTHORIZATIONS The first point I wish to make here is that the Fiscal Year 1976 budget request is for authorized activities, with the exception that funds are included for a number of projects in river basins which will require enactment of legislation increasing a number of river basin monetary authorizations. Such legislation is proposed for submission to Congress early in this session. Of the 29 river basin and project monetary authorizations, 11 will require additional authority of an estimated $376 million to utilize the funds required through calendar year 1976. Through calendar year 1977, 14 of these will require additional authority of an estimated $976 million. OLDER GENERAL AUTHORIZATIONS Other general authorizations under which we have been operating for some years and which are worthy of comment include the National Environ- mental Policy Act of 1969 and the River and Harbor Act of 1909. National Environmental Policy Act I am pleased to report that, in accordance with the National Environmental Policy Act of 1969, we have, for all practical purposes, filed with the Council on Environmental Quality (CEQ) environmental impact statements for PAGENO="0485" 479 all projects under construction. This also is true for all except a handful of projects on which we are currently performing routine maintenance work. Our present objective is to have satisfied, to the best of our ability, the intent of NEPA on all items in progress by the end of this calendar year. This does not mean that we are not still experiencing some delays in complying with NEPA, particularly on those projects which Congress authorized prior to January 1970. Our performance has been affected on some projects which were authorized prior to the passage of the National Environmental Policy Act, because of environmental litigation. To date, major lawsuits concerning 54 Corps projects have been filed on the basis of environmental issues. We are now enjoined from proceeding with all or part of the work on 11 of these. However, it appears that the frequency of suits directed against construc- tion projects under NEPA is declining as we proceed with newer projects which more fully reflect our current procedures under NEPA. We also are encountering delays on some projects which are not in litigation. We are being asked to review these again by the CEQ or by public interest groups, even though they are authorized by Congress, have environmental impact statements on file, and have funds appropriated by the Congress for planning and, in some cases, for initiation of construction. River and Harbor Act of 1909 In connection with environmental litigation, I wish to mention the unique situation concerning the proposed replacement of Locks and Dam 26, on the Mississippi River. With the filing of a joint lawsicit by the 50-194 0 - 75 - 32 PAGENO="0486" 480 railroads and environmentalists in an attempt to halt replacement of Locks and Dam 26, the Army is facing its first challenge to the authority provided under Section 6 of the 1909 River and Harbor Act for replacement of existing locks and dams. We now are updating and revising our Environmental Impact Statement and preparing a report on the proposed replacement to comply with instructions from the Court. This effort is expected to take about nine months, and the Secretary of the Army has decided to submit the report to the Congress for its consideration. This report is intended to be responsive to our understanding of the Court's instruction. However, its submission in no way should imply or suggest that our prior actions were not properly authorized by the 1909 Act. WATER RESOURCES DEVELOPMENT ACT OF 1974 Turning to more recent legislation, the Water Resources Development Act of 1974 authorized several special policy and program studies by the Secretary of the Army, acting through the thief of Engineers. That legislation, in my view, has not only opened up some new areas of endeavor, but will have a continuing long-range impact on the future thrust of water resources development and management policies. I would like to discuss some of these new areas of endeavor and their potential impacts, and to report on the status of some previously authorized studies. Two-Phase Authorization The two-phase authorization procedure authorized in Section 1 will strengthen program control by the Congress. It should assist program PAGENO="0487" 481 execution since the Congress can express its final approval of a project as it is to be constructed, thus eliminating or precluding delays such as those being experienced with some projects authorized prior to NEPA. It is essential that this two-phase process be streamlined to provide continuity of effort; otherwise, it may evolve into another occasion for delay and possibly even another recycling effort. Project Deauthorization The initial list of projects to be recommended for deauthorization under Section 12 of the Act is being reviewed by the Secretary of the Army for submission to the Congress. Some 350 projects are involved, all classified as "inactive" or "deferred," prior to enactment of Section 12. We are currently reviewing approximately another 100 projects eligible for deauthorization under Section 12 criteria. Demonstration Programs The Act places major emphasis on developing measures to control shore- line and streambank erosion which causes widespread damages to both private and public properties. One feature of the Streambank Erosion Control Demonstration Program, the Yazoo River Basin in Mississippi, has been funded thus far. The Shoreline Erosion Advisory Panel, established pursuant to Section 54 of the Act, met in December 1974 to organize and open discussions on implementing its mandate to demonstrate low-cost shoreline erosion control devices. To date, no funds have been provided for the demonstration elements of the Shoreline program. PAGENO="0488" 482 Authorized Program Increases The Water Resources Development Act of 1974 authorized several increases in our Continuing Authorities program and our Flood Plain Management Services program. The impacts of these increases should prove to be very beneficial. Planning Assistance to the States The budget request for the authorized program for Planning Assistance to the States is $300,000 for Fl 76 and $57,000 for the `76 Transition Quarter. These funds will enable us to continue to develop this excellent program. Non-Structural Alternatives Section 73 of the Act provides that non-structural alternatives will be on an equal footing with structural measures. The Corps is proceeding to implement the provisions of Section 73 in its planning program. Authorized Studies The National Strip Mine Study, authorized by Congress in 1970, is finished and being reviewed in our office prior to formulating recommen- dations to the Congress. The study describes the scope and magnitude of current and physical damages resulting from both past and present mining activities, and defines a number of remedial measures for rehabilitating abandoned strip-mined lands. Our report on the National Dam Inspection Program, authorized in 1972, also in nearing completion and will be submitted to Congress later this year. PAGENO="0489" 483 Other near completion special studies, authorized by the `74 Act to be submitted to the Congress soon, include: the Study on Hold and Save Harmless Requirements of Local Cooperation; Study on Land Use-Recreation Use; and the Study on Visitor Protection Services. BUDGET AND INPOUNDNENT CONTROL ACT OF 1974 Other legislation which will clearly impact on Appropriations is the Congressional Budget and Impoundment Control Act of 1974. Obviously, it is too early to determine the full effects of this important and far- reaching legislation. However, I am certain that it will go a long way toward providing a better focus on, and a better integration of, the three key ingredients in program development and achievement. As I mentioned in my opening remarks, these three ingredients are authority, means, and execution. ~ CONCLUSION*** This concludes my statement. However, additional information is contained in other statements on the budget presented to the Appropriations Committees last week. I would be pleased to furnish copies of these for the record. Also, my staff and I will gladly answer any questions you may wish to ask at this time. PAGENO="0490" 484 February 1975 SUMMARY STATEMENT for CONSTRUCTION AND PLANNING OVERALL BUDGET REQUEST The budget for Fiscal Year 1976 requests $1,092,700,000 for the Construction, General appropriation and $108,000,000 for planning and construction activities under theFlood Control, Mississippi River and Tributaries appropriation. Together with the deferral of $43,945,000 for Construction, General and $14,503,000 for Flood Control, Mississippi River and Tributaries from Fiscal Year 1975 to Fiscal Year 1976, these amounts will per it s bstantial progress on the 244 Continuing Construction projects in our Construction, General program and 13 features of the Mississippi River and Tributaries project. In addition, $360,000,000 is requested for the Construction, General appropriation and $37,300,000 for our planning and construction activities for the Flood Control, Mississippi River and Tributaries appropriation for the 1976 Transition Quarter. PROGRAM PRIORITIES Within the overall budget request for construction primary priority for allocation of funds was given to those projects which will provide hydroelectric power, and serious consideration was also given to projects which will provide urban flood control, navigation and municipal and industrial water supply. The need for upgrading recreation facilities at completed projects continues to receive emphasis. PAGENO="0491" 485 TWO-PHASE AUTHORIZATION The Water Resources Development Act of 1974, by establishing a new procedure for authorization of Corps projects, reflects Congressional concern over the tendency towards major post-authorization changes to Civil Works projects which greatly increase their scope and cost. Some of these changes have come about as a result of the passage of new legistlation, such as the National Environmental Policy Act. Although the need for chsnges due to altered circumstances has been recognized, the Congress has seriously questioned the use of administrative discretionary authority delegated to the Chief of Engineers as a basis for major modifications to projects previously authorized by Congress. Section 1 of the 1974 Water Resources Development Act recognizes this concern in the authorization process and facilitates Congressional review of final project formulation prior to full authorization. The two-phase authorization process will permit deferral of final decisions on authorization of controversial projects until needs and alternatives have been more fully defined than in the survey report. In addition, many of the the problems which become apparent during the processing of a survey report may be resolved during Phase I planning and, consequently, narrow the scope of issues which Congress must consider when authorizing construction to proceed. We are requesting funds for continuation of preconstruction planning of 10 projects authorized for Phase 1 only, and are requesting one new planning start for a Phase 1 only project. On two of these projects we are requesting funds for Phase 2 design during Fiscal Year 1976 and the Transition Quarter, as provided for in Section 1 of the 1974 Water Resources Development Act. PAGENO="0492" 486 Use of the funds requested for design beyond the Phase 1 stage will be contingent upon a finding that the projects are without substantial controversy and that the advance engineering and design will be compatible with any project modifications which may be under consideration. PROJECTS COMPLETED IN BUDGET PERIOD The Fiscal Year 1976 Budget request will permit completion of 25 projects and one additional project will be completed with funds requested for the 1976 Transition Quarter. These projects are expected to produce $261,939,000 in combined average annual benefits, of which $70,369,000 are attributed to Navigation; $22,218,000 to Flood Control; $149,302,000 to Power; $6,333,000 to Recreation; $1,351,000 to Municipal and Industrial Water Supply; and $12,366,000 for other project purposes. The average time required to complete these projects, after receipt of initial construction funds, will have been slightly more than six years. The 218 projects in the Fiscal Year 1976 and Transition Quarter Budget requests which will remain under construction after the 1976 Transition Ouarter will require an additional $6.6 billion to complete construction. PROJECT SCHEDULES This budget includes a large request for construction projects and for most projects the budget amount is as much as we can use. There are some projects which, based on optimum schedules, will be delayed by the budget request for those projects. However, many of the delays are for project features not critical to the major purpose, such as recreation or visitor's facilities. Therefore, I consider that this construction budget is sound, will provide for substantial progress, and will reduce the average time to complete our continuing construction program. PAGENO="0493" 487 POTENTIAL DELAYS As the Chief of Engineers stated we are confident we can accomplish our mission in a manner compatible witfi envitonmental requirements and without amendments to environmental ~eg~slation. However, we are antcicipating' that environmental demands will cause some project delays. The majority of these delays concern a few projects which were authorized prior to NEPA and for which construction funds were allocated after the enactment of NEPA. Where possible we have made changes to bring these older projects into closer harmony with the spirit of environmental concerns and legislation. However, there is increasing pressure from the Federal and private environmental communities for us to provide mere and mere information and analyses in supplemental environmental impact statements, or more seriously, to develop additional alternatives or to reformulate completely projects already planned, and sometimes under construction, prior to the passage of the National Environmental Policy Act and other environmental legislation. I am concerned with the possibility that some of these demands will delay construction and consequently increase ultimate costs. Considering the considerable Federal investment of money and planning effort previously committed to these older projects I believe some of these demands, from both the Federal and private sectors, might prove to be counterprodu~tive to the public interest Let me make clear that for new projects, the environmental quality objective will receive full status in planning studies from the outset, and not in after-the-fact manner necessarily used following the passage of NEPA. We will conscientiouslj consider environmental quality factors in the planning process when we balance competing alter-natives in terms of the public interest. PAGENO="0494" 488 NEW CONSTRUCTION AND PLANNING STARTS As explained by the Chief of Engineers in his opening statement, there are no new construction starts requested, since it was decided to apply the maximum possible amount to ongoing construction projects to maintain as many completion schedules as possible and to enhance employment oppor- tunities. However, the budget request does include funds for initiation of 14 new planning starts (2 added units at existing power projects, 4 navigation projects, and 8 flood control projects). These new planning starts will increase our construction capability in future years. The selection of new planning starts resulted from considerable study of individual projects and their ability to meet regional needs. Those projects selected most effectively met pressing water resource needs in their respective regions. For each of these projects, the benefit-to-cost ratio would be favorable when evaluated at a 5 7/8 percent discount rate, none had serious unresolved environmental issues and all showed clear evidence that local interests are able and intend to meet the requirements of local cooperation. PAGENO="0495" 489 REPROGRAMMED FUNDS I would like to recognize the Committee's assistance and cooperation in permitting us to achieve the maximum effective use of available funds through reprogramming actions. During Fiscal Year 1975, the Committee has approved 12 transfer actions exceeding the transfer authority delegated by the Committee to the Chief of Engineers. These transfers permitted the Corps to effectively utilize $12.5 million which otherwise might not have been fully used at the end of the fiscal year on the projects from which the funds were made available. I might also mention that, within the authority delegated to the Chief of Engineers, we made transfers through the end of December 1974, to projects under construction totaling about $15 million. This flexibility in utilization of available funds has minimized project delays, and has permited us to make maximum progress with available funds toward fulfillment of the Nation's water resource needs. DEFERRAL PROGRAM Although the Administration's FY 1975 deferral actions were taken to reduce inflationary pressures and are expected to delay some project completions and delay some realization of benefits, the overall impact is regarded to be minimal and temporary. Projects which had funds deferred in Fiscal Year 1975 include 23 new construction starts ($7,095,000), 53 Congressional increases or adds to the Fiscal Year 1975 Budget request for continuing construction projects ($36,850,000) and 12 features of the Mississippi River and Tributaries project ($14,503,000). The Fiscal Year 1975 deferral funds will be released in July 1975 and will have the effect of increasing the Fiscal Year 1976 program level by about $58.4 million. PAGENO="0496" 490 MONETARY AUTHORIZATION Although no funds are included in the budget for any projects not already authorized by the Congress, the budget does include funds for projects in River Basins subject to monetary limitations which require enactment of additional monetary authorization. At this time, we have one river basin for which the monetary authorization has been exhausted and there are three additional basins which will run out of monetary authorization in FY 1976 or the 1976 Transition Quarter. Proposed legislation for increased monetary authorization will be submitted to the Congress in the near future. ADVANCE ENGINEERING AND DESIGN $24,050,000 is requested for Advance Engineering and Design under the Construction, General appropriation. This amount will permit initiation of 14 new planning starts, continuation of planning on 100 projects, including completion of planning on 32 projects in Fiscal Year 1976. Planning will be completed on three additional projects in the transition quarter. Another $1,000,000 is included in the overall request for the Flood Control, Mississippi River and Tributaries appropriation for continuation of planning on five project features including completion of planning on one project feature. An additional amount of $6,215,000 for Advance Engineering and Design under the Construction, General appropriation is requested for the Fiscal ar1976 Transition Ouarter, providing for continuation of the Fiscal Year 1976 program at the same level of activity. Also, for the Fiscal Year 1976 Transition Ouarter, $300,000 is requested for continued planning of four project features under the Flood Control, Mississippi River and- Tributaries project. PAGENO="0497" 491 Our proposed budget for Advance Engineering end Design is important, in that it determines which projects will be available for construction in the near future. This part of the program has received much consideration and analysis to assure that the projects selected for advance engineering and design will contribute to meeting the Nation's highest priority water resource needs and will have minimum unresolved problems to prevent these projects from proceeding into construction. Accomplishment of the Army Civil Works program represents a teamwork activity in which the capabilities of other Government agencies, private - consultants, and private engineering and construction firms contribute greatly to the work supervised by the Corps. Architect-Engineering firms and expert consultants are being used in our civil works engineering activi- ties to the extent necessary to accomplish the design and planning required to get project construction underway within a resonable time and to assure use of the best talent available, both in and outside the Corps. The contri- butions of these groups to orderly accomplishment of the program has been significant. I should mention that in contracting out engineering and design work we insure that the type and amount of work retained in-house is in proper balance to maintain in-house capability and expertise in the Corps major-mission areas. SPECIAL CONTINUING AUTHORITIES The large unobligated balances in our special continuing authority programs for Small Flood Control, Beach Erosion, and Snagging and Clearing which I spoke of last year are expected to be essentially eliminated by the end of Fiscal Year 1975. Funds for the Emergency Streambank and Shore- line Protection Program have already been fully allocated and a backlog of PAGENO="0498" 492 approved projects is developing. Our requests for Fiscal Year 1976 are $1,500,000 for Small Navigation Projects, $4,000,000 for Small Flood Control Projects, and $1,000,000 for Emergency Streambank and Shoreline Protection Projects. Comparable amounts included for these authorities in the 1976 transition quarter are $500,000; $1,000,000 and $250,000, re spectively. RECREATION AT COMPLETED PROJECTS The request for recreation development at completed projects is based on the Administration cost-sharing policy adopted two years ago. The Fiscal Year 1976 request of $20 million and the $4 million requested for the 1976 Transition Quarter, reflects the continuing emphasis which this phase of our orogram is now receiving. $6.8 million of the $24 million requested for the entire period will provide for upgrading existing sanitary facilities to be consistent with current Federal and State pollution abatement laws. The remaining $17.2 million will be used for development of new recreation facilities where local interests have indicated their willingness and ability to assume 50 percent of the construction cost and operate and maintain the facilities after completion. Generally, we anticipate a greater increase in attendance at those projects close to urban centers as people seek recreation opportunities closer to their homes. This trend may accelerate as people attempt to conserve energy in the face of rising gas prices and possible gas shortages. In this connection, about two-thirds of the Corps lakes are located within 50 miles of Standard Metropolitan Areas. It is estimated that 70 percent of the Nation's population live in these areas. PAGENO="0499" 493 IMPROVING MATERIAL SUPPLIES The material shortages we were experiencing last winter and this past construction season have ceased to be a serious problem. With the decline in nationwide construction expenditures this past fall, all materials are more readily available today. With improving supplies, the rapid price escalation we have recently been experiencing should moderate. DEAUTHORIZED PROJECTS The Chief of Engineers previously stated that we have submitted to the Secretary of the Army a list of 350 projects or project features recommended to the Congress for deauthorization. These projects or features have an estimated Federal cost of $1.5 billion. All of the projects or features recommended for deauthorization have been in our "inactive" or "deferred" categories, and deauthorization is not expected to produce any su~bstantia1-controversy. In Fiscal Year 1976 and the Transition Quarter we will continue our review of projects eligible for deauthorization under the Section 12 procedures, and will examine projects which are somewhat more complex than those included on this year's list. PAGENO="0500" 494 SUMMARY - ALL AUTHORIZED PROJECTS ($ in millions) 1/ Excludes application of lump sum reduction for "Savings and Slippagea". Active Not Started Land Acquisition Reimbursements Active Underway MR&T Underway Completed Projects NR&T Completed Deferred Projects Inactive Projects Sub-Total No. Total Estimated Fed. Cost ~ Allocations thru FY 1975 ~ Approved Amounts Budget 1976 T Balance to FY 1976 1/ Quarter 1/Complete $ - $ 336 10,745 100 24 6 10,615 5 311 27 3 1 280 11 23 7 3 - 13 293 19,464 9,768 1,092 367 8,237 1 4,935 1,998 108 37 2,792 3,367 11,648 11,648 - - - - 165 165 - - 137 1,576 16 - - 1,560 504 4,654 4,187 53,054 45 23,774 - 1,230 - 411 4,142 27,639 Projects Recommended for Deauthorization 350 Total 4~304 1,560 51,494 10 - - 1,550 23,764 1,230 2T1 26,089 0