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FISCAL YEAR

1 9 8 2

Budget Revisions

Additional Details
on Budget Savings
APRIL 1981

Presidential Message
Introduction
Table of Contents
Budget Savings by Agency and Department
Savings Affecting Many Agencies
Appendices
Indices.

3
5
11
16
387
401
415

For sale by the Superintendent of Documents, U.S. Government Printing Office Washington, D.C. 20402

TO THE CONGRESS OF THE UNITED ST A TES

On March' 10, 1981, J forwarded to the Congress a fully revised 1982 Budget with
specific proposals for fiscal year 1981 and 1982 and clearly stated targets for 1983
through 1986. I have already submitted to the Congress the supplemental budget
requests, rescissions and deferrals for 1981 and budget amendments for 1982 necessary
for the Congress to act upon my proposals.
My Budget Reform plan, first presented February 18th and submitted in detail on
March 10th, was one of four parts of my comprehensive program for the Nation's
economic recovery. The Budget plan called, for substantial budget savings and a
redirection of Federal Government activities. It included more than 200 proposals for
spending reductions, user charges and off-budget savings that are necessary to put the
Federal Government on a path toward fiscal responsibility.
We have already provided extensive information on the proposed budget savings.
However, I want to be sure that the Congress and the American people fully
understand the reasons for the planned budget savings. Accordingly, I have directed
the Office of Management and Budget to compile a document to make available
additional details on the specific savings proposals.
I hope that this information will be useful to the various committees and
subcommittees of the Congress as they consider my proposals.

Ronald Reagan
April 7,1981
THE WHITE HOUSE

Introduction
The 1982 Budget Revisions submitted to the Congress by President Reagan on March 10, 1981,
reaffirmed the Budget Reform Plan which he announced on February 18th as one of four parts of his
program for the Nation's economic recovery. On February 18th, the President also announced his
proposals for relief from excessive tax and regulatory burdens and a stable monetary policy.17

Budget Targets
The 1982 Budget revisions placed before the Congress specific recommendations for actions needed
now to reduce sharply the rate of government spending and to reduce and redirect the role of the
federal government. The President's budget targets call for:

•

Actual
1980

1981

1982

Estimates
1983
_1984

1985

1986

520.0

600.3

650.3

709.1

770.7

849.9

940.2

579.6

655.2

695.3

732.0

770.2

844.0

912.0

-59.6

-54.9

-45.0

-22.9

0.5

5.9

28.2

Receipts

20.3

21.1

20.4

19.7

19.3

19.5

Target Outlays

22.6

23.0

21.8

20.3

19.3

19.2

19.0

Budget Totals
Receipts (with
tax cuts)
Target Outlays
ceiling
Target surplus
or deficit (-)

•

Percent of GNP

Summary of Budget Savings
Achieving these targets requires substantial budget savings. The 1982 Budget Revisions provided
details on budget savings for 83 major policy and program changes that had been announced on
February 18th and savings from over 200 additional budget reductions affecting nearly every
department and agency of the Federal Government.

See following publications: Fiscal Year 1982 Budget Revisions, March, 1981, Office of Management and Budget; and
Americas' New Beginning, A Program for Economic Recovery, February 18, 1981, The White House

The table below summarizes the savings proposed in the 1982 Budget revisions:
Estimates (fiscal year) inbillions
1984

1985

50.1

61.4

70.2

77.3

6.7

8.4

12.4

16.4

18.5

4.8

41.4

58.5

73.7

86.6

95.8

7.1

8.8

7.5

6.2

6.9

6.4

48.6

67.2

81.2

92.8

102.7

- Proposed user charges and
other proposals c /

0.3

2.6

2.9

3.3

3.6

4.0

Total Budget Savings

6.6

'51.2

70.2

84.5

96.4

106.8

4.7

6.9

8.4

9.8

11.6

7.2

55.9

77.0

92.9

106.2

118.4

•

1981

1982

4.8

34.8

1983

1986

Outlays
- Savings listed on
February 18th ^
-Additional savings planned
on Feb. 18 for March revision
(but not specified) b /
Subtotal
- Further savings now proposed
Total Outlays Savings

•

Receipts

•

Off-Budget
- Reductions now listed
Total Savings

^Measured from the current policy base.
b/
Measured from the January Carter Budget.
C/
Includes savings also proposed in the Carter January Budget and, for that reason, not listed
on the reductions table. These savings are:
1981

1982

1983

1984

1985

1986

Budget Outlays
0.3
8.2
9.1
9.7
11.1
11.5
Budget Receipts
0.2
1.8
2.0
2.2
2.4
2.6
The combined reductions announced on February 18th and March 10 will slow the rate of growth in
Federal spending in 1982 from 11.6% to 6.1%

Budget and Program Priorities and Criteria.
The President decided that achievement of his budget targets will require an end to the proliferation
of new Federal programs and a reversal of the trend toward greater Federal roles in planning and
controlling economic and social decisions.
He directed that all Federal programs be subjected to thorough scrutiny. However, in doing so he
decided that:
•
A margin of safety must be created by rebuilding the Nation's defense capabilities.
•

The Social Safety Net of income security measures erected in the 1930's to protect the
elderly (including cost of living protection for the elderly), unemployed, and poor, as well as
veterans, must be maintained.

Eight basic criteria were used in evaluating and making decisions on programs
1

Entitlement Programs must be revised to eliminate unwarranted beneficiaries and payments.

Subsidies and benefits for middle and upper income levels must be reduced.

Allocable costs of government programs must be recovered from those benefiting from the
services provided, such as airports and airways, inland waterways and Coast Guard services
to yacht and boat owners.

Sound economic criteria must be applied to economic subsidy programs such as synthetic
fuels, Export-Import Bank loans, and subsidized loans.

Capital investments in public sector programs—such as highways, waste treatment plants and
water resource projects—must be stretched out and retargeted.

Fiscal restraint must be imposed on programs that are in the national interest but are lower
in priority than the national defense and safety net programs. Examples include NASA,
National Science Foundation, and the National Institutes of Health, which would be allowed
to grow at lower rates than planned.

Large numbers of categorical grants must be consolidated into block grants permitting less
Federal administrative overhead, greater flexibility for State and local governments, greater
efficiency in management and reduced overall costs. The principal examples are elementary
and secondary education, and health and social services.

Federal personnel and overhead costs, and program waste and inefficiency must be reduced.

Budget Outlays by Agency
(in billions of dollars)
Actual
, 1980
1.2
0.6
0.1
7.5
24.6
3.8
132.8
3.2
13.1
6.5
194.7
12.6
4.4
2.6
29.7
1.9
19.0
76.7
5.6

Agency
Legislative Branch
The Judiciary
Executive Office of the President
Funds appropriated to the President
Agriculture
Commerce
Defense—Military
Defense—Civil
Education
Energy
Health and Human Services
Housing and Urban Development
Interior
Justice
Labor
State
Transportation
Treasury
Environmental Protection Agency
National Aeronautics and Space
Administration
Veterans Administration
Office of Personnel Management
Other agencies
Allowances
Undistributed offsetting receipts
Total revised budget outlays

Revised Budget
Estimates
1981
1982
1.5
1.4
.0.7
0.7
0.1
0.1
6.1
6.1
20.7'
23.7
2.9
2.5
158.6
184.8
3.3
3.2
14.3
12.4
10.5
11.1
227.6
250.7
13.5
14.3
4.4
3.3
2.6
2.5
35.5
26.7
2.2
2.4
22.0
18.3
87.7
92.6
5.5
5.2

4.8
21.1
15.1
20.0
- -

-21.9
579.6

5.3
22.3
17.9
19.4
—

-29.3
655.2

5.9
23.6
19.9
14.1
1.8
-32.0
695.3

Budget Authority by Agency
(in billions of dollars)
Actual
1980
1.3
0.6
0.1
12.5
24.9
3.1
142.6
3.3
13.8
10.0
195.9
35.7
4.6
2.5
28.8
2.1
18.2
90.6
4.7

Revised Budget
Estimates
1981
1982
1.3
1.5
0.7
0.7
0.1
0.1
14.0
9.8
26.3
25.9
2.4
2.1
177.1
221.8
3.1
3.1
13.5
12.3
10.5
11.9
226.2
255.3
32.8
29.0
3.9
3.4
2.3
2.3
32.2
27.9
2.3
2.8
23.4
19.2
86.2
92.9
3.0
1.4

5.2
21.2
24.9
34.3
—

-21.9
658.8

5.5
22.9
28.5
21.1
—

-29.3
710.1

6.1
24.2
30.4
17.9
2.3
-32.0
772.4

Additional Details Now being Presented
When the budget was reviewed, a large amount of information about existing programs was assembled
and used in making decisions on proposed revisions. To aid in understanding the savings proposals,
principal details about the progams have been summarized in the pages that follow for more than 200
planned changes. Briefly, each description shows:
•

Funding changes, compared to the Budget submitted to the Congress on January 15, 1981,
by former President Carter. The funding information has been broken down to show
changes due to reestimates and adjustments (e.g., for changes in economic assumptions or
availability of later estimates) and to policy or program changes. (When savings proposals
are included in both the Carter January Budget and the Reagan Budget, this is identified by
a footnote.)

•

Description of the program being changed.

•

The proposed change.

•

The rationale for the change.

•

Key facts about the program.

Most information is organized by department and agency. A detailed table of contents begins on
page 11. Policy changes to achieve budget savings that affect many agencies begin on Page 387. A
"key word" index begins on page 417. An index by budget reform criteria begins on page 425. And
an index by functional code begins on page 433.

Additional Summary Information
Appendices are also included which show:
•

Rescissions proposed and deferrals reported by President Reagan.

•

Programs being recommended for termination over 1981-1986.

Additional Details on Budget Savings
TABLE OF CONTENTS
Budget Savings by Agency and Department
Department of Agriculture

Page

Child Nutrition, Summer Food Service
Commodity Credit Corporation (CCC)
— Interest Rates ana Interest Waiver Changes
— Storage Facility Loan
Conservation Cost Sharing
Farmers Home Administration
— Business and Industry Loan Program
— Direct Lending
— Grant and Home Ownership Assistance
*
— Water and Sewer Loan Levels and Interest Rates
Food Stamps
Forest Service Reductions
Nutrition Assistance for Puerto Rico
Rural Electrification Administration (REA)
— Community Antenna Television (CATV) Loans Elimination
— Direct Lending Reductions (including elimination of FFB direct lending)
— Telephone Bank Capital Stock Purchase Elimination
Special Milk Program
Special Supplemental Food Program for Women, Infants and Children
User Charges for Grain Inspection and Cotton and Tobacco

21
23
25
27
29
31
34
36
37
39
41
43
44
46
48
49
50

Department of Commerce
Economic Development and Title V Regional Commissions Programs
Maritime Assistance: Construction and Operating Subsidies
National Oceanic and Atmospheric Administration (NOAA)
Land Remote Satellite Sensing (LANDSAT)
National Oceanic and Atmospheric Administration (NOAA) Ocean Programs
— Coastal Energy Impact Program (CEIP)
— Coastal Zone Management (CZM)
— Fisheries Management and Development
— National Ocean Satellite System (NOSS)
— Sea Grant Program
Public Telecommunications Facilities Program
Commerce: Summary of Small Items
— Office of Productivity, Technology and Innovation (OPTI)
— Minority Development Assistance
— National Oceanic and Atmospheric Administration (NOAA) Weather/Research

55
57
59
61
61
61
61
61
65
66
66
66

Department of Defense — Military
Defense Savings

Water Resources Programs
Water Projects Unfunded
Water Resource Development Construction
Water Research and Technology
Water Resources Council/Office of Water Policy
Waterway and Port User Fees

75
76
77
78
80

Department of Education
College Housing Loans
Elementary and Secondary Education Block Grants
Higher and Continuing Education
Impact Aid
Institute of Museum Services
Library Programs
National Institute of Education
Special Population Programs
Student Assistance
Vocational Education
Youth Initiative (see Labo"r)

85
86
90
93
95
97
99
101
103
105
248

Department of Energy
Alcohol Fuels/Biomass/Urban Waste
Department of Energy Administration/Overhead
Energy Conservation Programs
Energy Information Activities
Energy Regulation
Energy Sciences
Fossil
General Science
Magnetic Fusion
Other Supply
Solar
Synthetic Fuels
Uranium Enrichment

109
Ill
113
US
117
119
120
122
123
125
128
131
134

Department of Health and Human Services
Aid to Families with Dependent Children (AFDC)
and Child Support Enforcement (CSE)
Alcohol, Drug Abuse, and Mental Health Administration (ADAMHA)
Block Grants
Cuban/Haitian, Domestic Assistance
Health Maintenance Organizations
Health Planning
Health Professions Education
Indian Health Service
Medicaid, Cost-Effectiveness Increase
National Center for Health Care Technology
National Health Service Corps
National Institutes of Health
Office on Smoking and Health
Professional Standards Review Organizations (PSROs)
Public Health Service (Merchant Seamen) Hospitals and Clinics
Public Health Service (PHS) Commissioned Corps Physician Bonuses
Refugee Assistance, Domestic
Social Security
— Adult Student Payments
— Disability Insurance
— Minimum Payment Amount
— Payments on a Worker's Death
Supplemental Security Income

139
144
146,148,150
152
153
155
156
158
159
161
162
164
165
166
167
169
170
172
174
176
177
178

Department of Housing and Urban Development
Administrative Expenses
Community Development Block Grants (CDBG)/
Urban Development Action Grants (UDAG)
Federal Housing Administration (FHA)/Government National
Mortgage Association (GNMA) Mortgage1Backed Securities
Government National Mortgage Association (GNMA) Tandem Mortagage Assistance
Programs
Housing Counseling Assistance
Neighborhood Self-Help Development
Planning Assistance
Public Housing, Operating Subsidies
Rehabilitation Loan Fund
Research and Technology
Solar Energy and Energy Conservation Bank
Subsidized Housing
— Summary
— Program Level
— Tenant Rent Contribution
— Rental Assistance Payments
— Indian Housing
— Public Housing Moderanization

181
182
184
186
188
189
190
192
194
195
196
198
199
201
203
204
206

Department of the Interior
Bureau of Indian Affairs, Operating and Construction Programs
Fish and Wildlife Service
Improved Targeting of Recreation and Conservation Expenditures
Mineral Leasing Acceleration
Payment in Lieu of Taxes
Surface Mining Regulation and Reclamation
Youth Conservation Corps (YCC)

209
210
212
214
216
217
219

Department of Justice
Department Employment
Juvenile Justice and Delinquency Prevention Program Termination

223
225

Department of Labor
Black Lung Disability Trust Fund
Comprehensive Employment and Training Act (CETA)
— Employment and Training Grant Consolidation
— National Programs
— Public Service Jobs
Employment Service
Federal Employee Injury Compensation Program
Trade Adjustment Assistance
Unemployment Compensation for Ex-Servicemembers
Unemployment Insurance
— Extended Benefits
— Regular Benefits Work Test
Young Adult Conservation Corps (YACC)
Youth Initiative

229
231
233
235
237
238
240
242
243
245
246
248

Department of State
Conduct of Foreign Affairs

251

Department of Transportation
Airport Construction Grant Program
Airport and Airway Trust Fund
AMTRAK Fare Subsidy Reduction
Boat and Yacht User Fees (Coast Guard)
CONRAIL
Cooperative Automotive Research Program
Great River Road, Federal Highway Administration
Highway Construction Program, Federal Highway Administration
Highway Safety Grants (402)
Highway Safety Program (Research and Development, Regulations)
Northeast Corridor Improvement Project
Railroad Branchlines
Railroad Restructuring Assistance
Urban Mass Transit
— Capital Assistance
— Operating Assistance

255
257
259
262
264
266
267
268
271
272
274
276
278
280
282

Department of the Treasury
Treasury Law Enforcement and Tax Administration Staffing

287

Environmental Protection Agency
Clean Lakes, Great Lakes, Chesapeake Bay Program Reductions
Energy Research and Development
Regulatory Program Reductions (Agencywide)
Superfund
Wastewater Treatment Grants

291
293
294
295
297

National Aeronautics and Space Administration
Reductions in Research and Development

301

Veterans Administration
Beneficiary Travel
Construction Projects
Dental Treatment, Outpatient
G.I. Bill
— No Extension
— Flight Training and Correspondence Training
Insurance Loans
Physicians' and Dentists', Bonuses
Veterans Medical Program
— Medical Care
— Medical Staffing
Veterans Readjustment Counseling Centers

307
308
309
310
311
312
314
316
317
319

Foreign Assistance
Foreign Development Assistance
— Multilateral Development Banks
— International Organizations
— Agency for International Development
— P.L 480 — Food Aid.
— Peace Corps
— Common Fund for Commodities

323
325
328
329
330
331
332
14

Other Agencies
ACTION (Domestic Programs)
Appalachian Regional Commission (ARC)
Architectural and Transportation Barriers Compliance Board (ATBCB)
Civil Aeronautics Board (CAB) Subsidy Elimination
Community Services Administration (CSA)
Consumer Product Safety Commission
Corporation for Public Broadcasting
Council on Wage and Price Stability: Wage and Price Standards Program
District of Columbia
— Borrowing from the U.S. Treasury
Executive Office of the President: Resources
Export-Import Bank
Federal Emergency Management Agency
— Flood Insurance Program
Federal Trade Commission
— General Staff Reductions
General Services Administration
— Building Construction
— Historic Publication and Records Commission Grants
— Sales of Excess Materials from the National Defense Stockpile
— Federal Protective Service
International Communication Agency
Legal Services Corporation
National Consumer Cooperative Bank
National Endowments for the Arts and Humanities
National Science Foundation
Office of Personnel Management
— Annual Indexation of Civil Service Retirement Annuities
— Intergovernmental Personnel Act Grant Program
Postal Service
Railroad Retirement Board
Small Business Administration
— Business Credit Assistance
— Disaster Loan Assistance
— Summary of Small Items
Small Business Development Center
Women's Business
"8a" Minority Procurement Program: Business Development Expenses
Student Loan Marketing Assoication (SLMA)

335
336
338
340
342
343
344
346
347
348
349
351
352
354
356
357
359
361
362
364
366
369
371
373
374
376
378
380
382
382
382
382
384

Savings Affecting Many Agencies
Savings Due to Reduction in Regulations
Reductions of Federal Civilian Employment
Revision of Federal Pay Comparability Standard and Related Savings
Davis-Bacon and Service Contract Acts
!

389
390
396
398

Appendices
I. Rescissions and Deferrals
II. Programs Being Recommended for Termination over 1981-1986

403
411

Indices
I. Key Word Index by Program
II. Budget Reform Criterion Index
III. Functional Index

417
425
433

Budget Savings by Agency and Department

Department of Agriculture

Child Nutrition Programs1/
Agency: Department of
Agriculture

Functional
Code: 605

Funding
1981
CARTER BUDGET: 1 7
Budget Authority
Outlays
REESTLMATES & ADJUSTMENTS: 2 7
Budget Authority
Outlays

3737
3727

Budget Reform
Criterion: 2,6

1982

($ in millions)
1984
1983

4661
4324

5169
4810

5609
5225

6049
5642

6484
6053

-155
-85

-344
-545

-450
-667

-565
-801

-689
-939

-2173
-2051

-2291
-2161

3311
2790

3504
2953

2,682
2,533

2,811
2,653

PROGRAM CHANGES: 3 7
-35
-1768
-1911
-2053
Budget Authority
Outlaxs
-1651
-1806
-1939
REAGAN BUDGET:
2914
3702
2738
3106
Budget Authority
3727
2459
Outlays
2588
2619
1/
Includes funds transferred and available from the Section 32 permanent appropriation.
2/
Includes savings associated with nutrition consolidated grant for Puerto Rico.
3/ The Carter budget already included savings for this proposal. Total savings expected are as follows:
Budget Authority
Outlays

-35

2,221
2,080

2,381
2,251

2,535
2,395

1985

1986

Program Description
The Child Nutrition appropriation finances a variety of programs: school lunches and breakfasts, child
care meals, summer meals, snacks, nutrition education, equipment assistance, and State administrative
expenses. The lunch, breakfast, and child care programs subsidize all meals served, but the subsidy
amounts vary in three tiers by household income level. The summer program is fully subsidized for all
recipients. In recent years, large supplemental requests — $100 to $300 million — have been
commonplace to finance costs of subsidized meals claimed by States.

Proposed Change
At present, the Federal Government provides subsidies in three different categories (cash,
commodities, and special cash assistance) to school districts that agree to provide free meals to the
lowest-income students (those below 125% of the poverty line), and reduced-priced meals to those
with sHghtly higher incomes (between 125% and 195% of the poverty line). The basic cash and
commodity subsidies are distributed to schools based on the total number of children participating in
the meal program, regardless of income level. The result is a subsidy, equal to about 50% of the
purchase price of meals served to middle- and upper-income students— many of whom come from
families with very high incomes. Given the need to focus Federal benefits on those truly in need, the
Administration will propose legislation to focus subsidies on the lower-income groups.
The summer feeding program, which has been riddled with abuse and fraudulent claims will be
proposed for termination. Other nonessential activities funded under this account will also be
terminated, including funds to purchase new school food service equipment, nutrition education and
training grants to States, subsidized snacks, and all subsidies to schools with high tuitions. The base
and special subsidies for both free and reduced price meals will be annually indexed in future years
from 1982 levels for price changes in the currently authorized indices. Finally, schools will begin to
verify the income eligibility of students claiming full or partial meal subsidies.

Rationale
By focusing Federal meal subsidies on children from families in need, Federal costs will be reduced
by over 35% next year, or by more than $9 billion by 1986. At the same time, continued full and
partial Federal subsidies for lower income students will help to ensure that these students have access
to adequate nutrition at school. Administratively, these changes will reduce the existing complexity of
over 20 subsidy rates that vary by income level, type of meal, and type of institution claiming the
subsidy. Elimination of activities collateral to funding nutrition subsidies for the needy moves away
from inappropriate Federal involvement in State and local school administration.

Key Facts About the Program
•

Full subsidies will continue for over 10 million needy participating children under the
Administration's "proposal; Federal subsidies will end for 14.5 million middle and upper
income students whose familes' income exceed $15,630 per year.

•

Grand jury indictments were handed down in March 1981 for fraud in New York City's
summer feeding program, evidence of the continued abuse of that program.

•

Federal funding has grown dramatically on a portion of school meal financing.

CCC Interest Rates and Interest Waiver Changes
Agency: Department of
Agriculture

Functional
Code: 351

Budget Reform
Criterion: 4
Outlays

Funding

($ in millions)
1984
1983

1981

1982

CARTER BUDGET:

618

912

582

PROGRAM CHANGES:

-84

-212

REAGAN BUDGET:

534

700

1985

1986

655

684

714

-229

-254

-284

-316

353

401

400

398

*Budget Authority is excluded because it bears no relation to individual programs.

Program Description
A generally understood price support policy is that the interest rate charged on all Commodity Credit
Corporation (CCC) loans will be equal to the Treasury interest rate charged to CCC. (Also known as
CCC's cost of borrowing.) In practice, however, farmers have been charged interest rates below the
CCC cost of borrowing in recent years.
For three-year grain reserve loans, the Congress mandated in a 1980 amendment that all interest be
waived. Before that, USDA/CCC used discretionary authority to waive interest for the second and
third years of the reserve and charged interest for the first year.

Proposed Change
Interest which is due on all CCC loans will be charged at the CCC cost of borrowing rate.
Legislation is being submitted to eliminate the mandate that interest be waived on the first year of
1981 crop grain reserve loans only.
•

This action does not affect the 1980 crop.

•

Interest will still be waived for the second and third years of the loan.

•

Reserve loans would still receive higher-than-usual loan rates and extra payments for storage
costs.

•

The reserve program for the 1982 and beyond crops will be part of the Administration's
comprehensive farm program.

Rationale
The CCC cost of borrowing is well below commercial interest rates. Charging farmers interest at
CCC cost of borrowing will still provide farmers credit with terms much better than can be found in
the private market, while reducing Federal costs.
Restoring the ability to charge first year interest on 1981 crop reserve loans will help reduce CCC
operating costs without adversely affecting grain reserve participation.
•

Grain reserve loans provide higher loan rates than regular loans.

•

The Federal Government pays storage costs for reserve loans but not for regular loans.

•

Interest will still be waived for the second and third years of the reserve.

•

When interest was charged in the first year, the reserve still received tremendous
participation.

•

Now, even with all interest waived, virtually no feed grains remain in reserve. Generally,
participation is not a function of interest charged, but of commodity market conditions.

Key Facts About the Program
For the regular loan programs, CCC was lending funds to farmers at 11.5% interest at the same time
it was paying 15% interest to the Treasury for these funds.
When Congress waived all reserve loan interest,
interest-free credit during a year when there was a
This created the opportunity for CCC borrowers
Market or other short-term investments. This was
original purpose of a grain reserve.

many farmers used the reserve for short-term
high probability that the reserve would be called.
to place interest-free Federal loans into Money
truly an abuse of the reserve system, warping the

The following table provides the outlay savings for each action:

CARTER BUDGET:
Program Changes:
Interest on regular loans
Reserve loan interest waiver
Subtotal, changes
REAGAN BUDGET:

1981
618

1982
912

Net Interest Costs
($ in millions)
1983
1984
582
655

-4
-80
-84
534

-45
-167
-212
700

-49
-180
-229
353

-54
-200
-254
401

1985
684
-59
-225
-284
400

1986
714
-66
-250
-316
398

CCC Storage Facility Loans
Agency: Department of
Agriculture

Budget Reform
Criterion: 4

Functional
Code: 351
Outlays

Funding
1981

1982

($ in millions)
1983

1984

1985

1986

CARTER BUDGET:

210

150

PROGRAM CHANGES:

-25

-100

-110

-120

-130

-150

REAGAN BUDGET:

185

—

*Budget Authority is excluded because it bears no relation to individual programs.

Program Description
USDA (Commodity Credit Corporation) provides loans to farmers of up to $100,000 each to cover at
least 75% of the cost of building or renovating storage and drying facilities, usually for grain, rice, or
soybeans. These provisions, enacted in 1977, expire at the end of 1981, at which time a permanent
mandate for grain (only) storage facilities will exist.

Proposed Change
1981 and 1982 outlay reductions will be achieved administratively —
•

maximum loan coverage will be reduced from Carter policy of 85% to statutory minimum of
75%; and

•

repayment terms will be reduced from Carter policy of 8 years to 5 years.

Outyear reductions above $100 million are contingent upon elimination of permanent statutory
mandate. The Administration's farm bill will change the mandate to discretionary authority, allowing
a phased termination over several years.

Rationale
Excess crop storage has existed for three years and is expected to continue —
•

in 1979, a year of abundant supply, excess storage existed;

•

in 1980, a year of low supply, excess storage doubled; and

•

the recent drought and projected high grain demand indicate increased excess storage.

By proposing elimination of the permanent statutorily mandated program, the Administration will be
able to conduct a discretionary program, with terms equivalent to commercial credit, at reduced costs
and with a phased elimination over five years, to be completely eliminated in FY 1986. The
Administration will continue a smaller-scaled program in order to alleviate specific localized problems
in those few States where adequate storage capacity may still be lacking.

Key Facts About the Program
USDA analysis of storage availability as of October 1, 1980 showed a national surplus capacity of 3.8
billion bushels. Only 2 States showed minor deficits which in fact may not exist at all since the
assumption was made that all late harvested (after October 1) crops (corn, soybeans, and sorghum)
were in storage as of October 1, 1980.

The following table presents an overview of the situation:
Storage Availability
(in billions of bushels)
1979
(Good Production Year)
Supply of Stocks for Storage
Storage Capacity:
Off-farm
On-farm
Total
Excess Storage Capacity
States Still Experiencing Major
Deficits in Capacity:
Indiana
Kentucky
Michigan
Montana
Ohio

1980
(Bad Production Year)

15.6

14.7

7.2
106
17.8
2.2

7.3
1L2
18.5
3.8

-.067
-.068
+.003
-.018
-.105

+.005
+.044
-.038
+.143
-109

Conservation Cost-Sharing
Agency: Department of
Agriculture

Functional
Code: 302

Funding
CARTER BUDGET:
Budget Authority
Outlays
REESTLMATES & ADJUSTMENTS:*
Budget Authority
Outlays
PROGRAM CHANGES
Budget Authority
Outlays
REAGAN BUDGET:
Budget Authority
Outlays

Budget Reform
Criterion: 6
($ in millions)
1984
1983

1981

1982

212
228

215
200

234
251

—

212
228

1985

1986

254
244

272
260

290
280

-19
-10

-39
-25

-57
-42

-74
-58

-55
-15

-55
-31

-55
-38

-55
-46

-55
- 54

160
185

160
210

160
181

160
172

160
167

*Effect of eliminating allowance for inflation from discretionary programs.

Program Description
Three cost-sharing programs administered by the Agricultural Stabilization and Conservation Service
(ASCS) are included.
•

The Agricultural Conservation Program (ACP) provides cost-shares to farmers and ranchers
to establish conservation practices on agricultural land for erosion control, water conservation,
point and nonpoint pollution control, rural water quality improvements, forestry and wildlife
enchancement and energy conservation.

•

The Water Bank Program (WBP) provides cost-shares to landowners for maintaining,
improving and increasing water-fowl habitat in migratory water-fowl nesting and breeding
areas of the United States and land for leasing rent to protect wetlands.

•

The Forestry Incentives Program (TIP) provides cost-share and technical assistance for tree
planting and timber stand improvement (TSI) to increase supplies of timber products.

Proposed Change
•

ACP (-$40 million).
The reduction leaves $150 million for annual and long-term
agreements for cost-sharing for conservation and pollution abatement measures on 8.9
million acres.

•

WBP (-$10 million). The reduction eliminates funding for the program.

•

FIP (-$5 million). The remaining $10 million would support planting 120,000 acres and TSI
on 85,000 acres.

Rationale
The imposition of fiscal restraint on other programs of national interest is a necessary part of the
Administration's overall effort to reduce Federal expenditures. Many programs that are in the
national interest but which cannot be accorded an urgent priority must be reduced. Cost-sharing for
soil and water conservation and forestry development programs on private lands are among these
kinds of programs.

Key Facts About the Program
In the case of ACP there is evidence that the targeting of the public cost-sharing investment to
intensively eroding areas could conserve more soil at less cost. About 84% of all excess sheet and rill
erosion on agricultural land is concentrated on that 4% of the acreage that is eroding at rates of over
14 tons per acre annually. The ACP evaluation found that in the 171 sample counties for the nine
erosion control practices studied, land suffering sheet and rill erosion at rates in excess of 14 tons per
acre annually received only 21% of the sample practices. More than 52% of the sample practices were

installed on lands eroding at rates of less than 5 tons per acre annually. Practice installation costs per
ton of erosion reduction decline rapidly as the pre-assistance rate of erosion increases.
In the case of WBP, the public's investment in leasing of wetlands for water-fowl habitat protection
and development provides only temporary protection at increasing costs. Technical assistance to
private landowners interested in investing in wildlife development is available. Landowners were
assisted on 2.6 million acres in FY 1980. In addition the Migratory Bird Conservation Fund in the
Department of the Interior (DOI) will spend $16 million in FY 1982 for acquisition of wetlands for
bird and waterfowl production areas. This will add to the almost 30 million acres currently included
in the National Waterfowl Refuge System. An additional 1.6 million acres of wetlands are protected
under the wetlands acquisition or easement program administered by the Fish and Wildlife Service of
the DOI and about 5.1 million acres of wetlands provide local benefits under State control.
In the case of FIP, it has not been demonstrated that the market is unable to allocate resources for
timber production efficiently. Indeed, it is questionable that work accomplished through this program
is additional to that which would be accomplished in the absence of Federal assistance. What is clear
is that some costs of private investment are shifted to the public.

Farmers Home Administration
Business and Industry Loan Program
Agency: Department of
Agriculture

Functional
Code: 351

Budget Reform
Criterion: 4

Loan Guarantee Commitments

Funding
CARTER BUDGET:

1981

1982

741

500

PROGRAM CHANGES:
REAGAN BUDGET:

741

($ in millions)
1983

1984

1985

1986

500

-500

Program Description
The Business and Industry (B&I) loan program provides guaranteed loans to individuals, public and
private organizations and Indian tribes to finance projects to improve the economy of rural areas.
The Carter budget proposed, for 1982 and beyond, a program level of $500 million, $241 million
lower than the 1981 level. Legislation restricts this program to communities of 50,000 or less with
primary emphasis on serving communities of 25,000 or less. (From 1974-1980, 53.8 percent of the
B&I projects were located in communities of 5,000-10,000 people).
As currently administered, FmHA may guarantee up to 90 percent of the principal on privately
originated loans. There is no statutory limit on the size of individual loans (the average loan size was
$820,000 in 1979). The interest rate on the loan is negotiated between the borrower and the lender,
with the lender paying a 1 percent fee which may be passed on to the borrower. Repayment terms
vary as follows: 1) 30 years for land, buildings and permanent fixtures, 2) 15 years for machinery and
equipment, and 3) 7 years for working capital.

Proposed Change
The Administration proposes to terminate guaranteed B&I lending in 1982.

Rationale
The proposal to terminate the B&I loan program is consistent with the premise that it is more
appropriate for private capital to finance these types of rural development projects rather than affect
the resource allocation and interest charges through Federal guarantees.
Since B&I loans are made to many credit-worthy applicants, it has not been demonstrated that private
lenders would not finance such projects without Federal guarantees. Accordingly, there is no
evidence that rural development will be significantly affected by the elimination of this program.
(Local banks that sold die guarantees in the secondary market were the program's primary
beneficiaries.) Termination of this program is also consistent with the Administration's plan to return
FmHA to its original role of lender of last resort in the areas of farm credit, housing and certain
community projects.

Key Facts About the Program
Defenders of the B&I program argue that since the loans are guaranteed, the Government does not
incur any expenses unless a loan defaults. Defenders also point to the low default rate (traditionally,
less than 3 percent of the funds lent in any one year have defaulted). Further, only $41M in actual
losses have been paid out through December 31, 1980. However, lately, FmHA has purchased a
number of loans from banks which are over 60 days delinquent in payment and are treated as defaults
by banks. In such cases, the bank believes that the loan cannot be brought current, and the holder is
directed to FmHA. Consequently, FmHA executes the guarantee and buys back the loan, for
servicing as a direct FmHA loan.

The chart below illustrates the trend in secondary market purchases of B&l loans by FmHA.
($ in millions)
1977

1978

1979

1980

1981 (est.)

1982 (est.)

4.7

2.2

34.9

70.5

100.0

102.0

A significant amount of staff time is devoted to making and servicing these highly complex loan
projects. Termination of the program will enable FmHA to concentrate more of its staff resources on
servicing its existing portfolio of loans, and in serving in its traditional role of lender of last resort for
agricultural credit, low income housing, and selected community facilities loans.

Farmers Home Administration
Direct Lending
Functional
Code: 351,371,453

Agency: Department of
Agriculture

Funding
1981
CARTER BUDGET:
Budget Authority
Outlays
Direct Loan Obligations:
PROGRAM CHANGES
Budget Authority*
Outlays
Direct Loan Obligations:
REAGAN BUDGET:
Budget Authority
Outlays
Direct Loan Obligations:

Budget Reform
Criterion: 4
($ in millions)
1984
1983

1982

1985

1986

1,056
-1,205
12,990

3,644
2,557
10,237

3,049
2,952
10,237

3,454
3,232
10,237

3,764
3,490
10,237

3,870
3,652
10,237

-30
-565

-110
-2,354

-30
-179
-2,354

-105
-255
-2,354

-179
-331
-2,354

-255
-407
-2,354

1,056
-1,235
12,425

3,644
2.447
7,883

3,019
2,773
7,883

3,349
2,977
7,883

3,585
3,159
7,883

3.615
3,245
7,883

*
Budget authority funds the operations of three revolving funds which finance these programs and has no direct
relationship to direct loan obligation levels.

Program Description
The FmHA administers a broad range of rural credit programs for agriculture, housing, and
community facilities. In the January Budget, direct loan commitments for all of these purposes
totaled $12,990 million in 1981 and $10,237 million in 1982. For 1982, agricultural credit accounts
for approximately $5 billion, housing $4.4 billion, and community facilities $835 million in 1982.

Proposed Change
The Administration proposes to reduce 1981 direct loan obligations by $565 million. The chart below
describes the programs affected by this reduction:
$M

$M
Number of
Loans

1981
Budget

1981
Proposed

Number of
Loans

Farm ownership

870

10,563

790

9,592

Moderate income
homeownership

825

22,400

509

13,820

Water and sewer

750

1,777

590

1,398

110

2,276

101

2,053

Other agricultural credit
loans

The proposed change will include the following direct loan programs in FY 1982:
Loan
Level
(SM)
Farm ownership

Number of
Loans

700

7,650

Farm operating

1,325

39,200

Emergency disaster

1,600

30,890

1,690

Soil and Water Conservation

Loan
Level
(SM)

Number of
Loans

2,300

67,000

Moderate income housing

500

19,500

Rural rental housing

870

1,210

6,960

Water and waste

300

646

Community facilities

130

306

Resource Conservation and
Development
Low income housing

Very low income housing
repair

OTHER CHANGES:
Legislation is being proposed to eliminate interest subsidies for the following programs: farm
ownership, emergency disaster and moderate income housing loans. Legislation is also being
proposed to increase the interest rate for water, sewer and community facility loans to the municipal
borrowing rate. Finally, legislation is being proposed to eliminate emergency (disaster) loans to
applicants who can obtain credit elsewhere.

Rationale
FmHA was created to be a lender of last resort. Individual farmers and rural residents were the
primary clientele. Interest rates originally approximated the prevailing market, even though some
were subject to a statutory ceiling.
Recently, FmHA's role has changed. Through a variety of programs including the economic
emergency, disaster loan, and the business and industry loan programs, the agency has offered loans
without applying the credit elsewhere test. Further, substantial increases in prevailing market rates of
interest have widened the gap between the rates charged by private lenders, the rates charged by
Treasury and those offered by FmHA. This proposal is part of a government-wide effort to reduce
Federal involvement in credit markets and channel those able to obtain credit toward private lenders.'

Key Facts About the Program
The major programs affected by the budget revisions are discussed below:
AGRICULTURAL CREDIT:
Farmownership loans
•

Subsidized interest rates, low down payments (FmHA currently requires no down payment),
and long repayment periods (FmHA currently offers 40 years) provide an incentive to pay
higher prices for farm land. Eliminating interest subsidies and reducing the size of the Farm
Ownership program should reduce somewhat inflationary pressures on land prices.

•

Recent changes in the statutory authorities of the Farm Credit Administration (FCA) will
increase its role in serving young and beginning farmers. (FCA is a Federally-chartered
agency that obtains all of its financing from the private market.)

•

FmHA has not been a major source of farm real estate debt. As of January 1, 1981, FmHA
held only 9.4 percent or $9 billion of all farm real estate debt outstanding. The major
suppliers of such credit are the Federal Land Banks (a part of the Farm Credit System)
which hold 38 percent or $36.6 billion of this type of debt.

Farm Operating Loans
•

A level of $1,325 million will be proposed for FY 1982 which compares to only $850 million
available for FY 1981. The increased funding is intended in part to provide credit to
farmers who may have received financing under the Economic Emergency Loan program
which is expiring at the end of 1981.

•

Action will be taken administratively to increase the interest rate on operating loans to
limited resource farmers from 7 percent to the Cost of Treasury borrowing.

•

FmHA holds 15.4% or $13 billion of farm nonreal estate debt outstanding as of January 1,
1981. Commercial banks and the Farm Credit System held the major share of nonreal estate
debt (37 percent and 25 percent respectively).

Emergency Disaster Loans
•

Legislation will be proposed to eliminate from eligibility for Emergency (Disaster) loans
those borrowers who can obtain credit elsewhere. Traditionally, this FmHA program has
been limited to those who cannot obtain credit elsewhere. However, eligibility was expanded
through legislation enacted last year. Returning to a program open only to those who cannot
obtain credit elsewhere will provide for a reduction in the 1982 loan level from $2 Billion to
$1.6 Billion. Limiting eligibility to only borrowers who cannot obtain credit elsewhere
returns the Farmers Home Administration to its original role as a lender of last resort.

•

Legislation will also be proposed to increase the interest rate on actual loss loans to
noncredit worthy borrowers from 5 percent to the Cost of Treasury borrowing.

•

Subsidized disaster loans have led farmers to borrow more heavily than might otherwise be
the case.

•

These legislative proposals would be implemented together with administrative procedures to
reduce obligations under the Emergency (Disaster) program. For example, applicants for loss
loans would be required to purchase crop insurance to cover that portion of the yield used as
collateral on the loss loan (this action is expected to reduce substantially the demand for
emergency loans in the future).

RURAL HOUSING:
Low Income Homeownership Loans
•

In 1982, the amount of homeownership loans to low income families (incomes below
$11,200) will be maintained at the 1981 level.

Moderate Income Homeownership Loans
•

In 1982, the amount of homeownership loans for moderate income families* (incomes from
$11,201-$15,600) will be reduced from $802 million to $500 million. This proposed level is
just slighdy below the loan level actually used in 1980 ($585 million).

•

The proposed reduction will not significantly change the way in which the homeownership
program has been operated. Rather, it reflects the repeal of a recently enacted statutory
change that would have reduced the interest rate on loans to moderate income families from
about 13 percent (currently) to as low as 3 percent. Implementation of the legislation would
have resulted in a substantial increase in demand for loans.

RURAL DEVELOPMENT:
•

In 1982, the Water and Waste Disposal Loan program will be reduced from $575 million to
$300 million. This loan level will result in a loan-to-grant ratio of 3:1 which is more
appropriate than the 6:1 ratio contained in the Carter budget. Generally, the wealthier
communities that would qualify for loans without grants would be affected by the proposed
reduction in loan level.

•

The Administration will support legislation which has already been submitted to the
Congress to increase the interest rate on community facility and water and waste disposal
loans. The proposal would repeal the 5 percent interest rate ceiling and replace it with a rate
based on the municipal bond market. Funding of the loan and grant programs for water
and waste disposal are contingent upon enactment of on the proposed legislation.

344-211

33
0-81-2

Farmers Home Administration
Grant and Home Ownership Assistance
Agency: Department of
Agriculture

Functional
Code: 371

Budget Reform
Criterion: 6

Funding
CARTER BUDGET:
Budget Authority
Outlays
PROGRAM CHANGES
Budget Authority
Outlays
REAGAN BUDGET:
Budget Authority
Outlays

($ in millions)
1984
1983

1981

1982

11
12

108
13

109
14

-5
-4

-108
-11

-109
-14

6
8

1985

1986

109
15

110
18

110
20

-109
-15

-110
-18

-110
-20

Program Description
Includes home ownership assistance grants ($100 Million), rural development planning grants ($6
Million), and rural housing supervisory assistance grants ($2 Million).

Proposed Change
Funding for the programs is to be terminated effective April 1, 1981.

Rationale
Congress did not appropriate funds for the Home Ownership Assistance Program (HOAP) in either
1980 and 1981. The $100 Million Carter budget request for 1982 only would fund an experimental
program involving less than 900 units. The annual cost of subsidizing units under HOAP would be
slightly less than under the rural rental assistance program. However, the major disadvantage to
HOAP, is that assistance would be provided to individual owner occupants while rental assistance
payments finance a unit which may be occupied by several different tenants over the life of the
contract. Further, HOAP would be limited, by law, to areas where it is not feasible to construct
rental housing for low income families.
Elimination of funding for the other relatively small grant programs (e.g., rural planning, and
supervisory housing assistance) would have little, if any, effect on rural communities in general. Few
communities receive any of the limited funding currently available.

Key Facts About the Program
Summary of FmHA Grant Programs
1982

1981
January
Budget
Home Ownership
Assistance Grants (HOAP)
Rural Development Planning
Grants
Rural Housing Supervisory
Assistance Grants
Other
TOTAL

Reagan
Revisions

January
Budget

Reagan
Revisions

100

2
4

1
2

2
-

108

0
-

•

HOAP provides a supplemental grant to very low income families who could not afford the
mortgage payments of a 1 percent FmHA home ownership loan. Congress authorized this
program three years ago but did not appropriate funds.

•

Although the Administration is not proposing HOAP, very low income rural families may be
assisted through the following four existing FmHA programs:
($ in millions)

Rental Housing
Rental Assistance
Home Ownership Repair Loans
Home Ownership Repair Grants

1981

1982

918
403
24
25

870
398
24
25

•

The Rural Supervisory Assistance Grant Program finances organizations that counsel low
income rural households on Federal eligibility requirements filing applications for assistance,
etc. Since the FmHA loan level is proposed to be reduced significantly, agency staff will
have more time to counsel applicants and borrowers.

•

The rural planning grant program finances planning and technical assistance projects which
are not considered priority activities.

Farmers Home Administration
Water and Sewer Loan Levels and Interest Rates
Agency: Department of
Agriculture

Functional
Code: 352

Funding
CARTER BUDGET:
Direct loan obligations
Outlays
PROGRAM CHANGES
Direct loan obligations
Outlays
REAGAN BUDGET:
Direct loan obligations
Outlays

Budget Reform
Criterion: 6,4
(S in millions)
1984
1983

1981

1982

750
9

575
14

575
16

-160
-2

-275
-4

590
7

300
10

1985

1986

575
17

575
20

575
25

-275
-5

-275
-6

-275
-7

-275
-9

300
11

300
13

300
16

•Outlays represent the cost of interest subsidies calculated as the difference between Treasury borrowing costs and the rate
charged to borrowers.

Program Description
The water and sewer loan program finances projects in communities of 10,000 people or less. The
Carter budget proposed a loan level of $575 million which would support approximately 1,238 loans.

Proposed Change
The Reagan budget assumes the following two changes in the water and sewer loan program:
•

a reduced 1982 program level of $300 million which would support 646 loans. This loan
level, retained in the outyears, results in a 3 to 1 ratio of loans to grants;

•

support for a proposal in the Carter budget to raise the 5 percent interest rate to the average
muncipal bond rate charged on similar types of projects.

Rationale
The proposed program level reduction preserves the 3 to 1 ratio of loans to grants and directs
assistance to those communities that are too poor to afford water or waste systems without a grant.
This focus on the poorest communities is consistent with the Agency's original role as lender of la"st
resort.
The increase in the interest rate on water and waste loans will reduce Federal outlays and the demand
for these loans from those communities that can participate in the municipal bond market. This
proposal will not prevent those communities unable to obtain credit from constructing necessary water
and waste facilities; it will, however, pass on to such communities the cost of these facilities. The
Administration believes that this proposal will result in sounder public investment decisions and more
equitable and undistorted resource allocation.

Key Facts About the Program
The 5 percent rate for water and sewer loans was established in 1968 when the cost of borrowing was
only 6.25 percent. There is no analytical basis for retaining this subsidized rate when FmHA
currently is paying 13.82 percent to borrow from the Federal Financing Bank.

Food Stamps
Agency: Department of
Agriculture

Functional
Code: 605

Funding
1981

1982

Budget Reform
Criterion: 1
(S in millions)
1983
1984

CARTER BUDGET:
14289
11084
12882
15278
Budget Authority
15164
12722
14181
10950
Outlays
1/
REESTTMATES & ADJUSTMENTS:
-1409
-2280
-2880
Budget Authority
-1394
Outlays
-2266
-2861
PROGRAM CHANGES: 27
Budget Authority
-1717
-1927
-150
-2369
Outlays
-1917
-2357
-149
-1700
REAGAN BUDGET:
Budget Authority
10934
10082
9756
10029
Outlays
10801
9946
9628
9998
1/
Includes savings due to consolidation of food stamps with other nutrition programs for Puerto Rico.

1985

1986

16008
15889

16706
16582

-3261
-3239

-3806
-3781

-2533
-2520

-2660
-2647

10214
10130

10240
10154

The Carter Budget already included sayings for this proposal. Total savings expected are as follows:
1984
1982
1983
1985
1981
-2,204
-2,943
-150
Budget Authority
-2,646
-2,938
-2,182
-2,632
-2,923
-149
-2,928
Outlays

1986
-2,992
-2,977

Program Description
Food stamps subsidize the food purchases of low income households. e Each household meeting
eligibility requirements — a net income test, a disposable assets test, and a'work requirement for able
bodied persons — receives stamps redeemable for food. Monthly stamp allotments may be household
size and net income level. Allotments are annually indexed to changes in USDA's Thrifty Food Plan.

Proposed Change
In accordance with the Administration's efforts to target assistance to the most needy families, and to
restrain the uncontrolled growth of entitlement spending, major changes will be proposed in the food
stamp program.
For a family of four, eligibility will be limited to those whose gross income is less than $11,000 per
year — about $900 per month. Under current law, similar families with income in excess of $14,000
annually are eligible for food stamps. Overlapping school meal and food stamp subsidies will be
eliminated. Benefit calculations will be based on actual recent earnings or payments rather than
projected earnings or payments. A recipient's initial allotment will be prorated to ensure that the
benefits provided are more equivalent to the number of days in the month for which assistance is
needed. Liberalized allotment levels and income deductions scheduled to take effect in the next fiscal
year will be repealed. Tightened administration and program monitoring will yield additional savings
through reduced overhead costs, and through the elimination of payment errors and food stamp fraud.

Rationale
These changes will help to refocus the food stamp program on its original purpose — to ensure
adequate nutrition for America's needy families. The combined effect of food stamp's current
prospective income test and high deductions from income has been to divert the food stamp program
away from this original purpose toward a generalized income transfer program, regardless of
nutritional need. By restructuring food stamps to complement other nutrition programs and targeting
funds on those whose low income prevent them from maintaining an adequate diet, significant savings
can be achieved while ensuring that needy families have the resources to meet their nutritional needs.

These changes are also designed to eliminate anomalies found in the present program, where families
with high annual income are nevertheless eligible for food stamps during short, temporary periods of
unemployment. The present program also permits those with relatively high incomes to take higher
deductions for shelter and child care expenses than lower-income families. The Administration's
program would remove 400,000 such households from the rolls. At the same time, a family of four
with income below $10,985 would receive the full nutritional benefit — only modified to account for
duplicated nutrition subsidies.

Key Facts About the Program
•

Food stamp costs have doubled in the past three years and one out of ten Americans (22
million people) now participates in the program. The value of food stamp benefits grew from
$5.2 billion in 1979 to more than $10.3 billion in 1981 and over 6 million people were added
to food stamp rolls over that period.

•

In 1977, Congress established annual "caps" on Food Stamp appropriations, based on the
best available economic and program projections. For three of the four years that the "cap"
has been authorized, program growth has forced Congress to increase this statutory
appropriations "cap."
Increases enacted for FY 1980 and 1981 exceeded the "caps"
established for those years by more than 55% for each year. In addition, a second increase
of $1.2 billion above the "cap" for FY 1981 is currently pending.

•

Contrary to some popular suggestions, the growth in Food Stamp paraticipation is not
largely related to rising unemployment. Between February 1978 and February 1979, for
example, Food Stamp participation increased by one million while the number of
unemployed civilian workers remained constant. In the succeeding 12 months, Food Stamp
participation increased by over three million while the number of unemployed increased by
only 500,000. In 1975, at the peak of the recession, there were 7.8 million unemployed and
17.1 million Food Stamp participants. At the 1980 peak of 7.5 million unemployed, the
program grew to in excess of 22 million participants.

Forest Service Reductions
Agency: Department of
Agriculture

Functional
Code: 302

Funding
1982

1981
CARTER BUDGET:
Budget Authority
Outlays
REESTIMATES & ADJUSTMENTS:
Budget Authority
Outlays
PROGRAM CHANGES:
Budget Authority
Outlays
REAGAN BUDGET:
Budget Authority
Outlays

Budget Reform
Criterion: 4,6,8
($ in millions)
1984
1983

1985

1986

2,310
2,429

2,443
2,496

2,543
2,597

2,655
2,722

2,766
2.824

-100

-95
-150

-165
-220

-246
-313

-327
-386

-11
-11

-74
-64

-74
-74

2,155
2,146

2,236
2,265

2,274
2,272

2.304
2,303

2,335
2,335

2,365
2,364

2,166
2,157

Program Description
Forest Services activities include:
•

a comprehensive research
products from forest lands.

•

cooperative forestry programs which provide modest amounts of technical and financial
assistance to States and private owners of forest land.

•

management and protection of the 190 million acres National Forest System for
multi-purposes including timber, recreation, water, fish and wildlife, forage, wilderness, and
mineral and energy resource extraction.

program in the management, protection, and utilization of

Proposed Change
The only reduction proposed in FY 1981 is $11 million in savings from the employment freeze and
other administrative reductions.
A $74 million reduction is proposed for FY 1982 including $14 million in administrative savings. The
1982 budget will still exceed funds available in FY 1981 by $81 million. Reductions by major activity
are:
•

Research (-$9 million). This would result in a $134 million progam including $1 million in
administrative savings.

•

Cooperative Forestry (-$3 million). This deletes a $3 million grant for investment on
non-Federal forest lands in northern Minnesota.

•

National Forest System (-$62 million). This represents about a 3 percent reduction of the
approximately $1.8 Billion January Budget. About $13 million of this reduction is associated
with the employment freeze and other administrative savings.

Rationale
The proposed changes will reduce overhead and personnel costs of the Federal Government, reduce
economic subsidies, and impose fiscal restraint on programs of national interest:
•

Research. The lowest priority projects would be deleted or deferred.

•

Cooperative Forestry. . Deletion of grant to non-Federal public and private land owners in
northern Minnesota reduces economic subsidies.

•

National Forest System. The remaining $49 million represents relatively minor reductions in
road and facility construction and maintenance and for nontimber resource management.
This is expected to improve the efficiency of the transportation system and may delete or
defer the lowest priority projects.

Key Facts About the Program
Specific program reductions are presented below.
equal or exceed the FY 1981 budget.

In most cases the FY 1982 Reagan Budget will
($ in millions - BA)

1981 Base
Research
Cooperative Forestry
National Forest System
Cooperative law enforcement
Forest road maintenance
Forest trail maintenance
Recreation use
Wildlife and fish management
Range management
Soil and water management
Construction of facilities
Road construction
Purchaser road construction

1982
January
Budget

1982
Reduction

129
74

143
73

-8
-3

5
78
15
118
42
36
39
23
215
210
984

7
86
15
125
48
40
42
26
221
255
1,081

-1
-5
-2
-7
-3
-2
-1
-3
-15
=1Q
-60

The research program will still be increased by $5 million over FY 1981 after the reduction.
Although $3 million for cooperative forestry programs has been deleted, substantial investments have
been made in FY 1980 and 1981 ($19 million) to offset economic impacts of the Boundary Waters
Canoe Area Act of 1978. An additional $8 million will still be available in FY 1982 for investment on
National forests and to provide financial and technical assistance to resort owners and local
communities.
A number of National Forest System activities are reduced but in almost every case the revised budget
is equal to or greater than FY 1981 appropriation action. The revised budget provides for balanced
multiple-use management in a time of severe fiscal pressure. It does require that costs be reduced
and that some lower priority activities be deleted or deferred.

Nutrition Assistance for Puerto Rico
Agency: Department of
Agriculture

Functional
Code: 605

Funding
1982

1981
CARTER BUDGET: 17
Budget Authority
Outlays
REESTIMATES & ADJUSTMENTS:
Budget Authority
Outlays
PROGRAM CHANGES:
Budget Authority
Outlays
REAGAN BUDGET:
Budget Authority
Outlays
1/

1,095
1,404

1,095
1,040

Budget Reform
Criterion: 7
(S in millions)
1984
1983

1985

1986

1,229
1,151

1,303
1,281

1,359
1,336

1,402
1,377

1,427
1,402

-308
-280

-381
-359

-437
-414

-480
-455

-505
-480

922
871

922
922

Represents estimate of Puerto Rico's share of USD A categorical food assistance programs.

Program Description
Puerto Rico receives nutrition assistance under several USDA categorical programs including food
stamps, summer feeding, school lunch, school breakfast, equipment assistance, commodity assistance,
state administrative expenses, nutrition education & training, special -milk, and the Women, Infants
and Children (WIC) Supplemental feeding program.

Proposed Change
A consolidation of funds amounting to $0.9 billion is proposed in the form of a nutrition consolidated
grant. The proposed amount is about 75% of the expected 1982 level of USDA nutrition assistance for
Puerto Rico prior to proposed reductions in the catgorical feeding program. This consolidated grant
would eliminate the detailed nutrition prescriptions, financial reporting and accounting currently
required by Federal feeding programs, and would give the Commonwealth government the flexibility
to target nutrition assistance in accordance with its priorities.

Rationale
•

Puerto Rico has rapidly become heavily reliant on Federal payments as a source of income.
From about $1.3 billion in 1974, Federal outlays to Puerto Rico leaped to $2.8 billion in
1976. In FY 78, Federal payments were at a rate of $3.4 billion, more than one-third of
Puerto Rico's $8.9 billion gross product — and more than $1,000 for each of the 3.2 million
island residents.

•

The Food Stamp program has become a disincentive for self-sufficiency and work. 58% or
about 1.86 million of the island's 3.2 million residents receive food stamps.

•

Federal transfer payments increased from 7% of Puerto Rico's personal income in 1970 to
20% in 1977. By 1978, one of every eight Federal "food-stamp" dollars went to Puerto Rico.

With a nutrition consolidated grant:
•

Puerto Rico could focus on areas of greatest need. The availability of Federal funds or
sendees that are restricted in use distorts local priorities and induces dependency on
continued Federal payments. Under the Administration's proposal, nutrition funds will be
available with few conditions to treat problems and priorities identified by the
commonwealth. Duplication of nutritional aid could be eliminated.

•

Nutritional assistance could be made more responsive to the socio-economic characteristics
of Puerto Rico and supportive of the Commonwealth's culture and economy. More discretion
over use of funds could enable the Puerto Rican economy to grow faster. By involving
citizens and private sector groups in the planning and execution of food assistance, the
Commonwealth could become more self-reliant and stimulate local agricultrual production.

Key Facts About the Program
•

With less than 1.5% of the U.S. population, Puerto Rico absorbs more than 10% of the food
stamp budget.

•

Dependence on transfer payments and other Federal assistance has impeded Puerto Rico's
economic growth. Private sector growth has been blunted by excessive expansion of public
sector employment and benefits.

REA (Rural) Community Antenna Television (CATV)
Loans Elimination
Functional
Code: 452

Agency: Department of
Agriculture

Budget Reform
Criterion: 4

Funding
CARTER BUDGET:
Budget Authority*
Outlays
Loan guarantees
Direct loans
PROGRAM CHANGES
Budget Authority
Outlays
Loan guarantees
Direct loans
REAGAN BUDGET:
Budget Authority*
Outlays
Loan guarantees
Direct loans

1981

1982

32
19
3
(31)

2
12

-16
-7

($ in millions)
1984
1983
4
9

3
12
—

(34)

—

(34)

1985
4
2
—

(34)

1986
3
1
—

(34)

-10

—

(-16)

(-34)

16
12
3
15

1
2

—

(-34)

1
7

—

(-34)
1
1

•Includes Authority to Borrow.

Program Description
On February 14, 1979, President Carter announced a series of White House initiatives to "overcome
isolation in rural areas through modern communications technology." 'The initiatives included a
provision to finance facilities for television as well as other telecommunications services for rural
residents.
In 1981, insured loans bearing an intest rate of 5 percent are available to nonprofit cooperatives, and
insured loans at market rates and loan guarantees are available for profit-making CATV ventures. All
of these loans have a maturity of 35 years.
During Fiscal Year 1980, the first full year of the program, REA committed $34 million, its total
lending authority for cable television service. Insured loans of $10 million were made to four rural
cooperative systems in four States to serve a total of 11,500 rural families. Also, 18 loan guarantee
commitments totaling $24 million were approved for cable service for a total of 55,000 customers in
11 States.

Proposed Change
Terminate program effective April 1,1981.

Rationale
The proposal to terminate this program has resulted from the application of sound criteria to
economic subsidy programs.
The President's Budget Reform Plan proposes to significantly reduce Federal activities that are neither
justified by cost-effective use of tax resources nor by the President's commitment to market-directed
policy.

Key Facts About the Program
We do not believe that Federal assistance is necessary for the provision of this sendee. Available data
indicates that some 4300 systems (serving 11,000 communities and some 17.5 million subscribers) have
been installed with less than 1% receiving Federal funds.

REA Direct Lending Reductions
(Including Elimination of FFB Direct Lending)
Agency: Department of
Agriculture

Functional
Code: 271

Funding
1981
CARTER BUDGET:
Budget Authority
Outlays
PROGRAM CHANGES:
Budget Authority
Outlays
REAGAN BUDGET:
Budget Authority
Outlays

1982

Budget Reform
Criterion: 4
($ in millions)
1983
1984

1985

1986

6,245
4,774

6.245
5,752

6,745
7,387

7,280
7,571

7,870
7,520

8,500
7,800

-187
-38

-5,545
-1,152

-6.045
-2,360

-6,580
-3,670

-7,170
-5,091

-7.800
-6,630

6,058
4,736

700
4,600

700
5,027

700
3,901

700
2,429

700
1,170

Program Description
The Rural Electrification Administration (REA) of USDA makes direct and guaranteed loans for
construction and operation of electric and telephone utilities in rural areas. By statute, direct loans are
made by REA at very low interest rates — 2% or 5% — depending upon the project and the financial
condition of the borrower.
Loan guarantees are made to attract private capital to rural electric and telephone projects, particulary
in those cases where utilities do not have the equity structure or cash flow necessary to attract
privately-originated loans without Federal assistance.
Since the Federal Financing Bank was
established, the REA has relied almost entirely upon it as the originator of these guaranteed loans.
The Carter budget provided a minimum of $1,100 million and a maximum of $1,325 million in direct
loans for this program ($250 to $1,100 million for electric and $250 to $325 milllion for telephone
respectively). Also available in the Carter budget for loan guarantees in this program is a minimum
of $5,145 million and a maximum of $6,655 million.

Proposed Change
The following changes are proposed:
•

Discontinue FFB origination of REA-guaranteed loans; rely on private originations effective
October 1, 1981.

•

Eliminate 2% loans, substituting an equivalent amount ($150 million). of 5% loans.
(Legislation is being submitted to authorize this change, effective upon enactment.)

•

Eliminate direct 5% loans for generation and transmission facilities; substitute privately
originated loans with an REA guarantee. (A $62 million reduction in 1981 and a $100
million reduction in 1982.)

•

Reduce remaining direct 5% lending of $1 billion by $125 million in 1981 and by $300
million in 1982.

•

Substitute specific loan level limitations for existing limitation ranges.

Taking these actions will result in a dramatic reduction in direct Federal lending — $5.5 billion in
1982, and over $33 billion between 1982 and 1986. In addition, Federal interest subsidy costs would
be reduced by about $29 million in 1982 and by about $270 million over 1982-86.

Rationale
This proposal is an integral component of the Administration's overall effort to apply sound criteria to
economic programs.

Key Facts About the Program
The availability of these subsidies reduces the necessity for recipients to improve their financial
positions in order to attract private capital.
Within some individual states, rural electric systems may charge more than other utilities which have
access to public power projects and therefore provide electricity at relatively low cost. However,
nationally customers of REA-financed electric utilities receive service at rates on the average which
are less than average rates charged by non-REA-financed utiliites. A 1977 study of the REA electric
program by USDA and OMB found that REA-financed electric utilities charged rates on the average
which were 8 to 12% less than average rates nationally charged by non-REA-financed electric utilities.
The most recent available data (Jan. 1, 1980) shows that non-REA-financed electric utilities charged
on the average 9.9% more than REA-financed utilities for service provided to customers in the 2,500
KWH class per month.
When the REA electric program was established in 1935, only 11% of the Nation's farms had
electricity. Now more than 99% of the farms have electric service, and many of the are served by
electric co-ops.

REA Rural Telephone Bank (Capital Stock Purchase Elimination)
Agency: Department of
Agriculture

Functional
Code: 452

Funding
CARTER BUDGET:
Budget Authority
Authority to Borrow
Outlays
PROGRAM CHANGES:
Budget Authority
Authority to Borrow
Outlays
REAGAN BUDGET:
Budget Authority
Authority to Borrow
Outlays

Budget Reform
Criterion: 4
($ in millions)
1984
1983

1981

1982

22
130
171
\

22
149
165

22
96
180

22
130
194

22
126
144

—

-22

—

172
165

118
180

152
194

149
144

130
171

1985

1986

136
152

Program Description
The Act which established the Rural Telephone Bank in 1971, authorized the U.S. Government
through annual appropriation, (not to exceed $30 million annually) to furnish capital to purchase class
A stock in the Bank until the total of such capital reaches $300 million. TTiat objective will be
achieved by the end of FY 1981.
The Act requires that the funds provided by the Treaury for the purchases of such capital stock shall
bear interest at the rate of 2 percent per annum, and that retirement of the stock shall begin as soon
as practicable after FY 1985, so long as such retirement does not impair the operations of the Bank. It
is the intention of the Act that the Bank shall become self sufficient and independent of the Federal
Government at the time all class A capital stock purchased by the Government has been retired.
The 2% funds are mixed with funds which the Bank receives from other sources at higher interest
rates (e.g., 10% dividends on class B stock, 7% dividends on class C stock and 12 5/8% on current cost
of other borrowing) in order to provide funding to eligible borrowers (telephone companies and
cooperatives) at interest rates less than normal market rates.
The Carter Budget proposed that the authority to purchase class A capital stock be extended through
fiscal year 1985, but be limited to $22.5 million annually until the total of such purchases reaches $390
million. Legislation would be submitted to the 97th Congress.

Proposed Change
Do not propose legislation authorizing purchase of additional capital stock beyond FY 1981.

Rationale
Termination of this program will reduce Federal subsidies.
The President's Budget Reform plan proposes to significantly reduce Federal activities that fail to
assure cost-effective use of tax resources or that don't contribute to the President's commitment to a
market-directed policy.
Telephone companies (even in rural areas) should be encouraged, as aTe other private enterprise
undertakings to depend more heavily on private money markets for capital and less on the Federal
Government. The continued availability of Telephone Bank lending assures assistance to those
telephone companies and cooperatives which serve isolated areas where subscriber density is so low
that it may be uneconomic to attempt to provide telephone service at rates which subscribers could
afford.

Key Facts About the Program
•

The $300 million in capital stocks authorized by the act to get the program started has has
already been subscribed by the Federal Government.

•

The infusion of additional Federal funds at 2% interest tends to exacerbate and perpetuate
the problem of hidden subsidies.

•

Even without Government subscription to capital stock, the telephone bank will still have
the opportunity to borrow from the Treasury at the Treasury borrowing cost, a more
favorable interest rate than is available in the private market.

Special iMilk Program
Agency: Department of
Agriculture

Functional
Code: 605

Funding
CARTER BUDGET:
Budget Authority
Outlays
REESTIMATES & ADJUSTMENTS:
Budget Authority
Outlays
PROGRAM CHANGES:
Budget Authority
Outlays
REAGAN BUDGET:
Budget Authority
Outlays

Budget Reform
Criterion: 1,6
($ in millions)
1984
1983

1981

1982

119
115

125
117

129
122

95
90

119
115

30
27

1985

1986

136
128

146
137

155
145

98
92

102
96

108
101

113
107

31
30

34
32

38
36

42
38

Program Description
The Special Milk program subsidzes half-pints of milk served in schools. The subsidy covers the full
cost of milk for needy children and part of the cost for others.

Proposed Change
Eliminate special milk subsidies in schools that participate in other federally subsidized meal
programs. Milk is also susidized as part of the school lunch and breakfast programs.

Rationale
•

Special milk subsidies duplicate those funded by USDA subsidized meal programs. Needy
children will continue to receive fully subsidized milk through those programs.

•

Many schools have already dropped the separate milk program because it duplicates the milk
served as part of the school breakfast and lunch programs. Special Milk adds administrative
burdens in tracking and claiming milk subsidies separately from meal subsidies. In the
context of fiscal restraint, the Special Milk program is a low priority — a position taken by
many school food service directors.

Key Facts About the Program
•

Under administration proposals in 1982, milk subsidies in school meal and' milk programs
will exceed $450 million.

•

Eighty million dollars is spent on milk in the regular meal programs and an additional $115
million in the Special Milk program.

•

This program has been slated for reduction or outright elimination by every President since
John F. Kennedy.

Special Supplemental Food Program for Women, Infants, and Children
Agency: Department of
Agriculture

Functional
Code: 605

Funding
1981
CARTER BUDGET:
Budget Authority
Outlays
REESTEV1ATES & ADJUSTMENTS: 17
Budget Authority
Outlays
PROGRAM CHANGES:
Budget Authority
Outlays
REAGAN BUDGET:
Budget Authority
Outlays

1982

Budget Reform
Criterion: 6
($ in millions)
1984
1983

1985

1986

927
903

1,068
994

-17
-17

-326
-270

-327
-253

725
707

724
724

927
953

Represents savings associated with nutrition consolidated grant for Puerto Rico

Program Description
The Women, Infants and Children (WIC) program funds food supplements (milk, cheese, eggs,
cereals, juices, formula) for pregnant or nursing women, and infants, and children up to age 5. WIC
has grown rapidly in recent years with monthly average caseloads increasing from 300,000 in FY75 to
2.2 million in FY81 and with costs rising from about $100 million to nearly $1 billion. Many WIC
recipients also receive other Federal nutrition benefits, primarily food stamps.

Proposed Change
Reduce FY82 WIC appropriations request to $742 million — a 20% reduction from the FY81 level.
Alone this would reduce average monthly caseloads by about one-third. Caseloads would average 1.5
million in FY82 rather than 2.2 million proposed in the prior administration's budget Under existing
priorities, WIC clinics ought to serve pregnant or breast feeding women and high risk infants first
Lower priority would be given to postpartum, non-breastfeeding women and older children ages 1-5
with bad diets but no measurable nutritional deficiencies. Under the Reagan proposed funding level,
the highest priority recipients could continue to be served.

Rationale
•

•

WIC expanded explosively over the past six years — increasing in participation by over
700% and in spending by nearly 1,000%. This expansion paralleled rapid growth under the
Food Stamp Act of 1977, and in the school meal and child care feeding programs.
WIC benefits are available to families with incomes over 195% of the poverty level, or over
$17,000 per year for a family of four. Most WIC clinics do not verify recipients' income data
and WIC benefits are not exclusively available to the poor.
Some medical evidence indicates that WIC food supplements help increase infant
birthweight and reduce infant mortality. Yet 52% of WIC current recipients are not pregnant
women nor infants, but older children up to age 5. Many of these children have no
measurable nutritional deficiencies but are eligible on the basis of bad diets. There is little
evidence that WIC food supplements help children who have no demonstrated nutrition
problem and studies by the Center for Disease Control suggest that WIC may contribute to
obesity in some children. At the recommended funding level, WIC resources will be targeted
on those most likely to benefit from WIC food supplements, low-income pregnant women,
nursing mothers, and their infants with identified nutritional deficiencies.

Key Facts About the Program
•

USDA Inspector General audits in 1980 in 10 states with largest WIC programs showed
significant abuse by WIC food vendors, including sales of ineligile foods, overcharges for
food sold, and redemption of food vouchers m excess of food actually sold.

•

20% of WIC funds are used for overhead costs (salaries, etc.) rather than direct benefits.

User Charges for Grain Inspection and Cotton and Tobacco
Agency: Department of
Agriculture

Functional
Code: 352

Budget Reform
Criterion: 3

Funding
CARTER BUDGET:
Budget Authority
Outlays
REESTEVLATES & ADJUSTMENTS:
Budget Authority
Outlays
PROGRAM CHANGES 17 :
Budget Authority
Outlays
REAGAN BUDGET:
Budget Authority
Outlays
17

($ in millions)
1984
1983

1981

1982

49
52

32
33

34
34

36
36

37
37

39
39

-1
-1

-3
-3

-5
-5

-6
-6

-8
-8

-24
-24

7
8

7
7

49
52

1985

The Carter budget already included savings for the cotton and tobacco portion in the following amounts:
1982
1984
1981
1983
1985
24
24
24
24
Budget Authority
24
24
24
24
Outlays

1986

1986
24
24

Program Description
The Federal Grain Inspection Service (FGIS) of USDA was established in 1976 to assure that grain
exports and domestic shipments are accurately graded and weighed. FGIS uses Federal employees to
grade and weigh grain, and also authorizes this work to be conducted by certain State and private
agencies.
The current law authorizes FGIS to assess a user charge for the costs of grain grading and weighing
activities, but does not allow recovery of the costs of supervising these activities.
The Agricultural Marketing Service (AMS) of USDA establishes product standards and provides
classing, inspection and grading services for cotton, tobacco and naval stores. These standards and
services aid in the conduct of commerce between buyers and sellers of these products. AMS also
inspects warehouses in order to determine their financial and product storage conditions.

Proposed Change
Legislation is being proposed to allow USDA to recover the costs of supervising grain grading and
weighing operations, in addition to the current authorization to recover the cost of nonsupervisory
operations.
Legislation is also being proposed to allow USDA to recover all of the costs associated with cotton
classing, tobacco and naval stores grading, and warehouse examinations and inspecting, and licensing.

Rationale
As a matter of equity, costs which can clearly be identified as benefiting a limited-group should be
repaid by the beneficiaries.
The legislation would include recovery of headquarters. costs relating to grading and weighing
operations since these costs are an integral part of the service being rendered. However, the costs of
standardization, (establishing uniform standards, and developing new grading technology) and
compliance (assuring compliance with laws and delegation of activities to the States) would still be
funded by appropriations.
Because cotton classing, tobacco grading, naval stores inspections and warehouse examinations have
become an integral part of the marketing activity, it is also appropriate to recover these costs. The
legislation would include all costs associated with these programs.

Key Facts About the Program
Over 90% of the voluntary grading and inspection program costs for meat, poultry, dairy products,
and fresh and processed fruits and vegetables are funded through industry assessments.
These proposals are expected to have minimal impact on the firms in the industry. After deducting
the value of the sample, cotton classing could cost about one dollar per bale and tobacco grading
could cost one-half cent per pound. For grain, the additional cost is expected to be about .0042 cents
per bushel of grain inspected at terminals.
The 1976 amendments to the Grain Standards Act authorized recovery of both supervisory and
nonsupervisory costs. This legislation was amended in the 1977 Farm Bill to exclude the recovery of
the costs of supervision.

Department of Commerce

Economic Development and Title V Regional Commissions Programs
Agency: Department of
Commerce

Functional
Code: 452

Funding
CARTER BUDGET:
Budget Authority
Outlays
REEST1MATES & ADJUSTMENTS:
Budget Authority
Outlays
PROGRAM CHANGES: 17
Budget Authority
Outlays
REAGAN BUDGET:
Budget Authority
Outlays
17

Budget Reform
Criterion: 4
($ in millions)
1984
1983

1981

1982

711
605

674
698

736
748

-366
-19

-624
-381

345
586

50
317

1985

1986

798
782

861
849

924
885

-694
-536

-759
-622

-823
-755

-889
-844

44
212

39
160

38
94

35
41

-879
-799

-949
-902

The Carter Budget already included savings for this proposal. Total savings expected are as follows:
-366
-742
Budget Authority
-668
-811
-19
-409
-565
Outlays
-660

Program Description
The Department of Commerce's Economic Development Administration (EDA) provides grants, loans,
and loan guarantees to assist economically distressed areas and to deal with problems of economic
adjustment. The 1982 Carter Budget requested approximately $670 million in budget authority for
both 1981 and 1982 for EDA programs.
The Title V Regional Commissions provide some of the same types of assistance to eight regions
encompassing most of the country. The 1982 Carter Budget proposed that funding for the
Commissions be eliminated in 1982.

Proposed Change
The specific changes will involve: (1) rescinding remaining 1981 appropriations for EDA (-$342
million) and the Title V Regional Commissions (-$21 million) and (2) eliminating funding for both
programs in 1982. (EDA's trade adjustment assistance program is not included in the reductions and
will be transferred to the Department's International Trade Administration (ITA) in 1982.) These
changes will save about $4 billion in budget authority and more than $3 billion in outlays over the
next 5 to 6 years.
Except where pending project applications meet certain specified criteria (e.g., in the case of public
works—projects which have written permission to start construction) no new grants, loans, or loan
guarantees will be made starting this year. Funds are left for the orderly closing down of the
programs.

Rationale
•

These major program terminations are part of the effort to move away from misdirected
subsidy programs and to rely on the President's comprehensive economic plan to address the
real problems associated with deteriorating economic performance.

•

Economic expansion and job creation will be stimulated throygh the President's overall
economic recovery program, which includes general tax, spending and regulatory reduction
measures. By 1986, the program is expected to create 9 million new jobs. Improvement in
overall economic conditions offers more hope to distressed areas than do the programs to be
terminated.

•

Aid to urban areas and small cities will be provided from a restructured and more flexible
development program that will combine the Community Development Block Grant and
Urban Development Action Grant programs. The Farmers Home Administration will
continue to provide specialized development assistance to the neediest rural areas.

•

There is little evidence that the economic development expenditures of these programs have
fulfilled their primary purpose of inducing development in distressed areas that would not
have occurred either there or elsewhere without this investment

•

There is no evidence that the programs being terminated have created new national jobs.
Rather such programs appear primarily to influence the allocation of productive resources
leading to a subtraction in potential growth in some areas to enhance growth in others. The
government does not create net new jobs in the economy by moving productive resources
from the private sector to the public sector.

•

The programs being terminated often lock people and resources into firms and areas that
have lost their economic viability. The nation pays for this subsidization of inefficiency
through direct budgetary costs and hidden costs of decreased productivity and economic
growth. Our economic system generates prosperity and high living standards through a
process of continual economic change.

•

These economic development programs often substitute Federal resources for expenditures
that would have been made by the private sector or local public sector.

•

The funding of Regional Commissions is an inappropriate Federal role. These Commissions
often duplicate activities that would normally be undertaker by States without Federal
support.

Key Facts About the Programs
•

Economic development programs are not targ'etted to those most in need. Over 80% of the
country is eligible for EDA assistance. Regional Commissions cover 35 states. Areas no
longer in distress continue to be eligible for assistance.

•

States can expect to receive substantially more benefits from personal and corporate tax
reductions ($54 billion in 1982) under the President's program than they have received from
EDA and Regional Commission funding.

Maritime Assistance: Construction and Operating Subsides
Agency: Department of
Commerce

Funding
CARTER BUDGET:
Budget Authority
Outlays
REESTIMATES & ADJUSTMENTS:
Budget Authority
Outlays
PROGRAM CHANGES 17 :
Budget Authority
Outlays
REAGAN BUDGET:
Budget Authority
Outlays

Budget Reform
Criterion: 5

Functional
Code: 403
($ in millions)
1984
1983

1985

1986

665
636

733
688

805
737

-23
-57

-31
-23

-44
-34

-54
-44

-107
-40

-29
-53

-55
-44

-86
-54

-124
-59

415
562

549
528

579
569

603
600

627
634

1985

1986

1981

1982

488
609

522
623

601
638

-24

-21

-21
488
564

The Carter Budget already included savings for this proposal. Total savings expected are as follows:
1984
1982
1983
1981
Total Savings:
—
-141
-170
Budget Authority
-166
-149
-127
-45
-68
Outlays

-221
-164

-279
-183

Program Description
•

The Department. of Commerce's Maritime Administration provides two types of direct
subsidies to the maritime industry; 1) ship construction differential subsidies (CDS) of up t.o
50% of the price of building new privately owned merchant ships in U.S. shipyards; and 2)
operating differential subsidies (ODS) to offset the higher costs (primarily wages) of
operating U.S.-flag vessels in the oceanborne foreign commerce. The 1981 appropriation
provided CDS to construct five new dry bulk carriers and meet existing 20-year contract
obligations for ODS. The Carter 1982 budget proposed funds to construct three additional
dry bulk carriers and also to meet existing 20-year contract obligations for ODS.

•

The Maritime Administration (Marad) also guarantees construction loans and mortgages on
U.S.-flag vessels built in the United States. These guarantees enable eligible parties to obtain
long-term financing at interest rates comparable to those available to AAA-rated corporations.

Proposed Change
For the construction differential subsidy (CDS) program, the Administration proposes:
•

an annual program level averaging $100 million in 1982 through 1986;.

•

two new ships in 1981 (already funded); two new ships in 1982; the quantity and type of
ships to be subsidized in 1983-1986 to be specified later.

For the operating differential subsidy (ODS) program, the Administration proposal is to:
•

meet the Government's obligation on existing contracts; no additional ODS commitments are
included in the budget.

For the loan guarantee program:
•

the level of new loan guarantee commitments would be reduced by $300 million in 1981 to
$900 million and by $350 million in 1982 to $1,050 million.

Rationale
•

This proposal is an integral component of the Administration's overall effort to stretch out
and retarget public sector capital investment programs. The Administration plans to conduct
a full review of maritime policies including the need for subsidies, the importance of
shipbuilding capability and the merchant marine to national defense, the impact of planned
increases in naval shipbuilding, ways to increase commercial participation in military support
functions, and the effect that new tax policies and possible trade agreements may have on
improving the competitiveness of the U.S. merchant marine.
57

•

While the proposal assumes that two ships will be subsidized in 1982, it leaves for later
specification the types of ships to be constructed, as well as the appropriateness of other
assistance to the maritime industry. These decisions would flow from the maritime policy
developed.

•

The reduction in new loan guarantee commitments is consistent with the Administration's
efforts to reduce and control Government intervention into private credit markets.

Key Facts About The Program
The proponents of Marad construction and operating differential subsidies usually cite as justifications for
continuation of the progam:
•

Maintenance of-a shipbuilding/ship repair mobilization "base" in the event of war or a
national emergency;

•

Maintenance of a competitive U.S.-flag fleet in the ocean foreign commerce;

•

Usefulness of merchant vessels as military support in a war or national emergency.

Facts on the CDS program's contribution to maintenance of a shipbuilding/ship repair mobilization base:
•

Total employment in the active shipbuilding/ship repair "base" has increased from 67,000 in
1961 to 73,000 in 1971 to 123,000 in December, 1980 while the percentage of new merchant
vessels contracted to be built with CDS has decreased from 70% in 1961 to 41% in 1971 to
20% in 1979.

•

CDS contracts currently account for only 3,871 (3%) of the .123,000 employed in the active
shipbuilding base (as of 12/80).

•

4 of the 27 major yards in the active shipbuilding base currently have contracts through
Marad:

•

—

Sun Shipbuilding and Drydock in Chester, Pennsylvania, which has already announced
its intention to go out of the new construction business as it is no longer competitive;

—

Norfolk Shipbuilding and Drydock (Virginia), which has recently announced a positive
backlog of orders;

—

Avondale Shipyards in New Orleans, Louisiana which has backorders in the millions of
dollars and jobs they are unable to fill;

—

Levingston Shipyard in Orange, Texas, which is in the same positive position as is
Avondale.

The expanded naval shipbuilding program will provide stimulus for competitive yards
requiring new orders.

Facts on subsidy as a requirement to keep the U.S.-flag fleet competitive in the world commerce:
•

The U.S.-flag fleet share of U.S. oceanborne foreign commerce is approximately 4%.

Facts on subsidy as a requirement to maintain a viable fleet for military support in the event of war or a national
emergency:
•

Less expensive, foreign-built ships can be purchased for U.S. military purposes; the
Department of Defense has recently purchased 8 foreign-built ships for chartering by the
Military Sealift Command.

•

Twenty-two (22) or less than 15% of the merchant-type ships (165 total) in the National
Defense Reserve Fleet (NDRF) were built with subsidy.

other facts:
•

Operating differential subsidies (ODS) lock the Government into 20-year contracts with no
control over increasing costs and most existing contracts do not expire until the 1990's.

•

There are 156 ships receiving ODS subsidy-and they are owned by 20 companies—7 liner
companies and 13 bulk and tanker operators.

NOAA Land Remote Satellite Sensing (LANDSAT)
Agency: Department of
Commerce

Functional
Code: 306

Budget Reform
Criterion: 6

Funding
CARTER BUDGET:
Budget Authority
Outlays
REESTIMATES & ADJUSTMENTS:
Budget Authority
Outlays
PROGRAM CHANGES:
Budget Authority
Outlays
REAGAN BUDGET:
Budget Authority
Outlays

($ in millions)
1984
1983

1981

1982

1
1

124
120

174
169

-122
-118
2
2

1
1

1985

1986

165
167

149
149

131
131

-138
-133

-129
-131

-113
-113

-95
- 95

36
36

Program Description
Under current policy, in 1983, the Department of Commerce's National Oceanic and Atmospheric
Administration (NOAA) is scheduled to take over operation of the United States civil land remote
sensing satellite program (LANDSAT) from the National Aeronautics and Space Administration
(NASA).
A LANDSAT satellite covers almost any given spot on the earth about every 16 days, and through its
sensors, provides data on renewable and nonrenewable earth resources.
The LANDSAT earth resources program will move into a semi-operational phase in the fourth
quarter of 1982 following the launch and checkout of the new satellite series, LANDSAT D, by
NASA. NASA has the Rinds in its budget to finish building and to launch two new "D" series
LANDSAT satellites (D and D^). The satellite remote sensing data will be used by several Federal
agencies (e.g., USDA and DOI), State and local governments, foreign governments, and the private
sector for such applications as agriculture forecasting, mineral resource exploration, water resource
planning, and land use classification.
The 1982 Carter Budget projections reflected a 1979 Administration commitment to provide data
continuity (i.e., LANDSAT type data) through the procurement of two additional satellites ( D ^ and
D ^ l ) extending satellite coverage into the early 1990's.

Proposed Changes
The Administration proposes to terminate the commitment to earth sensing satellite data continuity
through the 1980's by cancelling plans to: (1) upgrade the LANDSAT ground system, and (2)
purchase additional satellite hardware needed for backup and extended satellite coverage through the
end of the decade.
Under the revised plan, NOAA would continue to use the Department of Interior's EROS Data
Center for processing, distributing, and archiving LANDSAT data. Additional funding ($700,000) is
included so that the EROS Data Center can adjust the satellite reference system to the new
LANDSAT D orbit
Additional satellites, beyond the two new NASA-budgeted satellites, and ground system improvements
would depend on the private sector's willingness to invest in and operate" an earth resources satellite
system.

Rationale
It is the Administration's judgment that the present NASA investment in LANDSAT satellites is
sufficient to permit evaluations of operational uses of LANDSAT data and, if these uses are cost
effective, to attract a private sector owner/operator.

NASA's program to develop, launch, and test two additional satellites (LANDSAT D and D*) will
continue as previously planned. Expansion and extension of the U.S. civil land remote sensing
program, beyond that already funded by NASA, is inconsistent with the need for across-the-board
fiscal restraints. The NOAA operation of LANDSAT D and D^ should provide satellite data
continuity through the mid 1980's, by which time the private sector could develop a system if a
sufficient market exists.

Key Facts About the Program
Longer term research on advanced satellite earth sensors (i.e., beyond LANDSAT capability) would be
continued by NASA, as previously planned, so that the United States will have the capability of
launching even more advanced and cost-effective satellite systems later in the decade. This advanced
sensor capability may be heeded to maintain United States leadership in earth remote sensing in the
face of strong competition ftom the French and Japanese.
The outyear projections include funds for NOAA to operate the LANDSAT system. A cost-recoveryfrom-users policy will be worked out over the next few months.

Funding Analysis:
The following table summarizes by activity the LANDSAT funding in the Carter and Reagan budgets
in NOAA, NASA, and the Department of Interior.
1980
Actual

1981
Carter
Budget

Change

(BA in Millions of Dollars)
1982
Reagan
Carter
Reagan
Budget
Budget
Change
Budget

1983-1986
Carter
Budget

Change

Reagan
Budget

DOC/NOAA:
Spacecrafts
& Launching
( D ^ or D
orRefurb.
of D)
Ground System
(Godard Data
Center
(Other)
Planning &
Operations
Total, NOAA
NASA:
LANDSAT D
&D1
Operations
Advanced
Sensors
Planning
Total, NASA
DOI:
EROS DATA
Center
Total, LANDSAT

104
14

-104
-13

(11)
(3)

(-11)
(-2)

124

-122

89
3

84
3

—

(--)

(-•->

104
2

89
3

—

106

119

—

(—)
(--)

_11

106

- -

•

- -

—

<--)

8
2
97

11
106

11
234

—

- -

—
—

^122

—

459

-459

- -

(—)
(1)

(-)
(—)

(—)
(—)

1
2

161
620

=12
-476

144
144

84
3

82
3

8
2
97

34
"121

11
112

791

- -

—

-476

82
3
34
2
121

5Q
315

NOAA Ocean Programs
Agency: Department of
Commerce

Functional
Code: 300,452, 376

Funding
CARTER BUDGET:
Budget Authority
Outlays
REESTIMATES & ADJUSTMENTS:
Budget Authority
Outlays
PROGRAM CHANGES: 17
Budget Authority
Outlays
REAGAN BUDGET:
Budget Authority
Outlays
17

Budget Reform
Criterion: 6

($ in millions)
1983
1984

1981

1982

156
167

124
177

168
194

-51
-12

-111
-82

105
155

13
95

The Carter Budget already included savings for this proposal. Total savings
1982
1981
-183
Budget Authority
-233
-194
-221
Outlays

1985

1986

209
224

226
224

210
208

-161
-156

-202
-201

-219
-217

-203
-201

7
38

7
23

7
7

expected are as follows:
1984
1983
-262
-303
-255
-306

1985
-318
-317

1986
-311

-292

Program Description
The Department of Commerce's National Oceanic and Atmospheric Administration (NOAA) supports
a national weather service 2/ , ocean/atmospheric research, coastal/ocean mapping and charting, coastal
zone management and energy impact assistance, environmental remote satellite sensing 37 and fisheries
research, management and development.
A short description of the NOAA ocean programs proposed for change follows:
•

The Coastal Energy Impact Program(CEIP) provides Federal assistance (loans and grants) to
States and localities to plan for and mitigate the impact of coastal energy development
activities. The Carter 1982 Budget requested $1 million in budget authority for 1982 but
included gradually increasing funding for loans in the outyear projections. The Carter
budget projected that any significant coastal energy impacts, which exceeded localities'
capabilities, would not occur until the mid-1980's.
27
National Weather Service reductions are discussed in a separate paper summarizing smaller
Department of Commerce reduction items.
37
See NOAA land remote satellite sensing (LANDSAT) paper.
•

The Coastal Zone Management (CZM): State grant program provides Federal grant
assistance (80% Federal matching share) to 25 States to administer and implement CZM
programs that protect and develop in a "rational" manner their coastal zone. The Carter
1982 Budget requested $39 million to maintain current funding of the State programs and
proposed a gradual phasedown of Federal funding starting in 1983.

•

The Sea Grant program was designed to develop marine research capabilities across the
country in 16 participating Sea Grant Colleges and other academic institutions. The Carter
1982 Budget requested $39 million to maintain the 1980 funding level.

•

The proposed National Ocean Satellite System (NOSSJ would be used to obtain
oceanographic data for civil and military weather prediction and to assess the role of the
ocean in determining the world's climate. In addition to NOAA ($16 million in 1982), DOD
and NASA would share in the $900 million total cost of NOSS, which is in the early stages
of development.

•

The Fisheries Management and Development programs include collecting marine fisheries
stock data for management plans, State grants for commercial development and anadromous
species, aquaculture and undersea research, a vessel-buy back program for the State of
Washington, and cooperative grants to the commercial fisheries industry to improve existing
operations and to expand into new fisheries. The Carter 1982 Budget proposed that $25
million of 1981 appropriations for fisheries activities (Washington State vessel-buy back at
-$10 million and various management/regulatory activities at —$15 million) be rescinded.

Proposed Changes
The Administration proposes the following changes:
•

The Coastal Energy Impact Program (CEIP): The remaining 1981 loan funds ($40 million)
will be rescinded and CEIP will be terminated for a savings of $158 million from the Carter
Budget through 1986. The remaining balance for the energy impact formula grants will be
utilized in 1981 ($27 million).

•

The Coastal Zone Management (CZM): Federal funding will be terminated for the program
starting in 1982. The 25 States will need to assume responsibility for supporting their CZM
programs to the extent they believe appropriate. This will save the % general taxpayers $179
million through 1986 from the Carter Budget proposal.

•

Sea Grant program: Federal funding to Sea Grant Colleges and institutions will be
eliminated starting with 1982 for a total savings of $222 million through 1986. States,
localities, and the private sector are expected to pick up support for some portion of the
ongoing activities.

•

Fisheries Management and Development: Overall funding will be curtailed through
reaffirmation of the Carter proposed rescission and additional reduction actions, which
include: (1) termination of State fisheries grants and industry subsidies, and (2) reduction in
research activities. This will result in savings totaling $127 million from 1981 to 1986.

•

National Ocean Satellite System (NOSS): The NOSS project will be cancelled. The project
is in early stages so there will be little lost in investment made to date. This action will
result in a total NOAA savings of $364 million; when DOD's and NASA's share of the costs
are included, the total savings will be close to $1 billion.

Rationale
These programs generally are in the national interest but cannot be accorded a high priority in time of
fiscal restraint. In times such as these, State and local support must assume responsibility for
programs that primarily benefit local jurisdictions. Some promising investments in science and
technology must be restrained and new undertakings postponed. NOAA will continue to have
adequate funding to maintain its priority ocean related research and services activities aimed at
conserving marine fisheries resources, understanding the long-term effects of pollutants on the ocean
environment, and the protection of life/property in the coastal areas. The programs that are being
reduced or terminated are primarily those programs that support State/local and industry programs
which should be supported by the users.
The specific rationale for such program reductions is as follows:
CEIP
The Administration proposes to terminate the CEIP program because:
—

This change is consistent with the original intent of the CEIP program to provide Federal
assistance only if essential.

—

The local impacts from oil and gas development have proven to be far less than originally
anticipated and well within the capability of States and localities to handle.

—

CEIP has fostered "institution building." The States have now developed planning capacity
for addressing coastal energy development.

— This change is consistent with the original intent of the CEIP program to provide Federal
assistance only if essential.
CZM State Grants
The Federal support of the State CZM programs has largely achieved its purpose:
—

States covering 78% of the coastline already have received 7 years of Federal coastal zone
management program assistance. Continuation of the States' CZM programs and any
additional improvements should be financed by the States.

—

This change is consistent with the original intent of the CZM program — to provide Federal
seed money.

—

Congress has acknowledged ultimate phase out of the Federal assistance for States' CZM
programs.

Sea Grant
The Administration proposes to terminate Federal funding for the Sea Grant program because:
—

The Sea Grant program has largely met its original intent of creating nationwide marine
research and advisory network.

—

The Sea Grant College programs are primarily directed to satisfy local, State or regional
needs.

—

Sea Grant research has provided useful results, but Sea Grant College research and
information sendees can be conducted without NOAA funding.

—

In general, Sea Grant funding is not a major source of revenue for these institutions.

Fisheries Management and Development
These reductions will have minimal impact on marine fisheries:
—

The State grant program on the average represents a small part of the marine fisheries
program. The original intent of the program to build States' capabilities has been achieved.

—

If economic incentive exists, the fishing industry will expand into new fisheries without
Federal subsidies. Many projects do not address national needs.

—

The aquaculture and other research will be maintained at adequate levels. Aquaculture
research has focused on commercially attractive species for many years and private industry
should be willing to take over at this point.

NOSS
—

The cost of NOSS is too high at this time. Oceanographic data needs can be met through
other means and data requirements for global weather models are not urgent. Improvement
of weather forecasting will not be an immediate result from NOSS. The program is
considered low priority in comparison to other defense-related programs.

Key Facts About the Program
With the revised budget, NOAA will still be able to conduct the following essential ocean programs
— The NOAA fisheries research and management program will be maintained at $109 million in
1982.
—

NOAA programs designed to understand better the marine environment and research the
effects of man-made and natural pollution discharges into the ocean will be maintained at
$18 million in 1982.

—

NOAA will continue its current level of effort for developing and updating coastal/ocean
charts and issuing severe weather warnings for marine transportation and recreational safety.

CEIP
—

Current projections of associated population increase resulting from coastal energy
development are minor — about 8,000 annually nationwide.

—

Louisiana, the largest recipient of CEIP funds, also received approximately $500 million in
1979 severance taxes from oil and gas — funds which could be used to address local
population increases.

—

Thirty-one coastal States and U.S. territories have received financial assistance through the
CEIP.

CZM
—

Prior to receiving CZM administration grants funding, 35 States received 3-4 years of
developmental funding.

—

Eighteen of the twenty-five approved State CZM programs would have received their fourth
year of administration grants in 1982.

—

The average annual grant is $1.4 million. The range is from $0.5 to $4.0 million.

Sea Grant Program
—

The Sea Grant Program has provided financial assistance to support research, education and
extension courses at 46 institutions including 16 Sea Grant Colleges.

—

Fourteen State legislatures already appropriate funds as an explicit item in their State
budgets.

Fisheries Management and Development
—

In 1980, 50 States and 6 U.S. territories received $5 million in fisheries state grants to carry
out research and development of commercial fishery resources. The amounts of these grants
range from $3,000 to $25,000.

—

In 1980, 19 States received $2 million in anadromous grants to conserve, develop, and
enhance the nation's sea lamprey anadromous fisheries resources. The amounts of these
grants range from $1,000 to $421,000. Alaska, California, Oregon, and Washington receive 71
percent of the funds.

—

Funding for aquaculture and undersea research programs will be at $6 million in 1982.
Priority aquaculture research and two undersea research programs will be continued.

—

The fisheries development program emphasizes the promotion of American fishery products,
the development of under-utilized species, and technological innovation.

NOSS
—

Funding was included in three Federal agencies under the Carter Budget as follows:
(BA S in millions)
1981
6
6
12
24

Commerce (NOAA)
NASA
Defense
TOTAL

1982
16
35
45
96

1983
43
53
88
184

1984
71
47
116
234

1985
71
30
106
208

Public Telecommunications Facilities Program
Agency: Department of
Commerce

Functional
Code: 503

Funding
CARTER BUDGET:
Budget Authority
Outlays
REESTIMATES & ADJUSTMENTS:
Budget Authority
Outlays
PROGRAM CHANGES:
Budget Authority
Outlays
REAGAN BUDGET:
Budget Authority
Outlays

Budget Reform
Criterion: 6
($ in millions)
1984
1983

1981

1982

22
22

-22
-3

-22
-9

-22
- 8

1985

1986

22
22

-22
6

-22
0

Program Description
•

This program was started in 1961 to provide "seed money" to local interests desiring to
initiate or improve public (and educational) television and radio stations' operational
capabilities. It provides funding for planning, equipment, and facilities. Over the past two
decades, the program has spent over $193 million which has been used for the start-up,
expansion and improvement of 1,187 public T.V. and radio facilities.

Proposed Changes
•

The Administration is proposing to terminate funding for new grants for this program in
1981. In 1981 a rescission has been proposed, and no additional funding is being sought in
1982 and beyond.

Rationale
•

In imposing fiscal restraint on programs of a national interest, we believe this program has
accomplished its purpose and it is, therefore, of a low priority given the overall economic
objectives of the President.

•

The program has achieved its fundamental objectives of establishing, extending, and
strengthening the availability of public programming. Public programming, (either T.V. or
radio) via terrestrial, cable or satellite transmission currently reaches over 90% of the U.S.
population.

•

The Federal Government has achieved its primary objective in providing funds to establish
public programming for most of the country. Local interests themselves should ultimately be
responsible for further capital expenditures.

•

The private sector, through the expansion of cable T.V., the development of low power T.V.
stations, the expanded use of satellite communications, and other technological developments,
is substantially expanding the communications alternatives foT the public.

Key Facts About the Program
•

The further development of the cable industry should serve to expand the reach of public
broadcasting through private initiative. Recent estimates show that all of the nation's
approximately 4,100 private cable systems carry at least one public T.V. signal; many carry
multiple signals.

•

More than 7 million Americans, or over 2.5 million households not within reach of an
over-the-air public T.V. signal, currently receive public T.V. via cable.

•

The continued expansion of satellite and the advance of low-power T.V. will increasingly
offer new alternatives for providing more options to the public.

65
344-211 0 - 8 1 - 3

Summary of Smaller Department of Commerce Items
Agency: Department of
Commerce

Functional
Code: 370,300

Funding
1982

1981
CARTER BUDGET:
Budget Authority
Outlays
REESHMATES & ADJUSTMENTS:
Budget Authority
Outlays
PROGRAM CHANGES:17
Budget Authority
Outlays
REAGAN BUDGET:
Budget Authority
Outlays
17

Budget Reform
Criterion: 6
(Sin millions)
1984
1983

1985

1986

306.9
303.1

347.1
343.7

357.0
3515

369.1
362.9

37L1
366.6

424.1
420.3

-6.0
-7.6

-33.5
-27.5

-36.7
-34.8

-410
-36.2

-46.3
-41.7

-504
-46.6

300.9
295.5

313.6
316.2

320.3
317.7

327.1
326.7

324.8
324.9

373.7
373.7

The Carter Budget already included sa?ings for this proposal Total savings in 1981 are expected to be S8.5 million in budget
authority and $10,1 million in outlays.

Program Description
A number of smaller reductions are proposed in the following Department of Commerce programs:

•

Office of Productivity, Technologyt and Innovation (OPTI). and related technology transfer
programs, initiated during the Carter Administration, were intended to foster the adoption of
existing technologies by industry and assist in the creation of new technologies. The Carter
Budget included the establishment of three "generic technology centers" in 1981 and one
additional center in 1982, as part of a joint program of technology development with
industry. The Carter Budget also included funding for: a technology transfer program to
increase the utilization of Federal and foreign technology; the centralized licensing of
patented Government inventions; and Federalization of the functions of the Science
Information Exchange, Inc., to disseminate abstracts of Federal research in progress.

•

Minority Business Development Agency (MBDA) provides for the delivery of management
and technical assistance to minority businesses through private consulting firms. The Carter
Budget requested $39 million for this function in 1982, which constituted a $5 million
increase over the 1981 level.

•

The National Oceanic and Atmospheric Administration (NOAA) is responsible for weather
services, and its National Weather Service operates over 300 weather stations across die
country. These stations disseminate information on local weather conditions, including
approaching severe storms. NOAA also conducts a climate research program. The Carter
Budget proposed that in 1981 funds be rescinded for new local weather radars and that in
1982 funds for the development of advanced radars and automated surface operations be
increased significantly.

Proposed Changes
•

•

The Reagan Budget reduces the Commerce technology programs by $5.8 million in 1981 and
$16.2 million in 1982 by: eliminating the Office of Productivity, Technology, and Innovation
and the Government Inventions program; phasing out direct appropriations for the
technology transfer programs; and maintaining the Science Information Exchange (SIE), as a
private contractor rather than having the Federal Government assume the function.

MBDA management and technical contractual assistance will be reduced by 10% in both 1981
and 1982.

•

In 1981, funds for the installation of local weather warning radars in selected areas will be
rescinded, and the development of advanced radars (NEXRAD) and automated surface
observation equipment will be slowed down in 1982. In addition, low priority part-time
weather stations will be closed. Climate research and information dissemination activities will
also be reduced in scope. This results in a savings of $9.3 million and 125 full-time
permanent positions in 1982.
66

Rationale and Key Facts
OPTI:
•

The Reagan Administration is aware of no convincing evidence that direct Federal spending
programs or specific Federal interventions in the private sector contribute to increased
productivity; indeed, they are likely, to do the opposite. Federal intervention and regulation
deter the natural private sector impetus to research and invest in new technologies that result
in increased productivity. Increased productivity and economic growth will be stimulated by
the general tax, expenditure control, and regulatory measures outlined in the President's
Economic Recovery Program.

•

The Government Inventions program is not needed since the patent licensing function can
be carried out by the agency sponsoring the research.

•

In keeping with the policy to recover allocable costs by means of user fees, direct
appropriation support for the technology transfer program and SIE will be phased out.

MBDA:
•

The proposed changes in MBDA and NOAA are an integral part of President Reagan's
comprehensive plan to impose fiscal restraint on programs of national interest.

•

Although MBDA's management assistance funding will be reduced, MBDA will be able to
offer management assistance in 1982 in the 100 metropolitan areas with the highest
concentration of minority businesses, as proposed in the Carter Budget

•

MBDA's plan to reduce the number of clients receiving technical assistance will result in
more in-depth service per client.

•

The 1982 reduction in funding from the Carter Budget still constitutes an increase over 1980
and 1981 program levels for technical assistance.

•

SBA also provides management and technical assistance to minority business. Moreover, SBA
provides significant financial assistance.

NOAA:
•

The areas where weather stations are to be closed and local radar warning systems
terminated will still be adequately covered by other weather stations and network radars.
NEXRAD and automated surface observation development is not urgent, and the testing can
be spread out over a longer time.

•

The proposed reductions to the National Weather Service budget have been selected with
the objective of reducing labor-intensive operations.

•

Thirty-eight part-time Weather Service Offices (WSO's) will be closed and the forecast and
warning responsibility will be reassigned to adjacent offices. Eight Weather Service Forecast
Offices (WSFO's) will be converted to Weather Service Office (WSO) status. Their aviation,
marine, and agricultural forecast program responsibilities will be reassigned to an adjacent
full-service WSFO. State and regional public forecast guidance will continue to be prepared
at these eight stations.

•

Climate program activities will continue at an adequate level of funding.

Department of Defense — Military

Department of Defense Savings
Agency: Department of
Defense

Functional
Code: 051

Savings
BUDGET AUTHORITY:
Pay1'
Operations
Acquisition
TOTAL
OUTLAYS:
PayV
Operaitons
Acquisition
TOTAL

1/
Budget Authority
Outlays

Budget Reform
Criterion: 8

1981

1982

($ in millions)
1983
1984

68
270
262
607

2005
290
1565
3860

3330
550
1216
5096

3714
920
1698
6332

3900
1370
1959
7229

4045
1920
2139
8104

68
240
40
348

2005
280
632
2917

3330
500
956
4786

3714
800
1338
5852

3900
1200
1669
6769

4045
1600
1899
7544

1985

;e. Pay savings from the Carter Budget are as follows:
1982
1984
1983
1981
1985
31
363
1831
2688
3533
31
386
1831
2688
3533

1986

1986
4443
4443

Program Description
Savings for the Department of Defense are categorized into three major areas:
Pay — salaries for civilians, retired pay cost-of-living adjustments, and deferral of military retired pay
reform
Operations —for the military establishment which covers everything from the day-to-day operations
and maintenance of the military installations to paying for consultants and'travel.
Aquisition —including acquisition management and the procurement of supplies and equipment.

Proposed Change
Pay adjustments — The Administration will propose major legislative changes in the way that Federal
Civilian Pay is adjusted each year to maintain "comparability" with the private sector. Also annual
cost of living adjustments for military retired pay will be proposed as well as withdrawal of military
retired pay reform proposals made by the Carter Administration.
Operations —Savings in Defense Operations incude those from: operating efficiencies in travel,
consultants, and civilian manpower utilizaiton; consolidations of functions and reductions in overhead
and joint use of facilities; and contracting out of functions which private enterprise can handle more
efficiently, and modification in administrative practices under the Davis-Bacon and Service Contract
Acts.
Aquisition Reform —Savings in this category include improved acquisition management, elimination-of
marginal systems, productivity savings, and multiyear procurement. The most substantial savings will
result from acquisition management improvements.

Rationale
Pay adjustments — The Administration will propose changes in the way Federal civilian pay is
adjusted each year to maintain "comparability" with the private sector. These changes include:
expanding the comparability principle to include benefits as well as pay; expanding the wage surveys
to include state and local government wages as well as private sector data; paying white-collar salaries
on a locality basis; and paying ony 94% of comparability to offset the Federal advantage in job
security, promotion opportunity, pension portability and other non-pay conditions of of employment
The current system of adjusting retired pay twice a year by the increase in the Consumer Price Index
has resulted in a situation wherein a significant majority of military retirees are receiving annuities
larger than those who retire today. The disparity had been growing larger each year. The proposed
change to an annual adjustment of military retired pay will slow down the growth in this disparity.

The previous Administration proposed a change in the uniformed serivices retirement system that is
significantly more costly than the current system for the next 20 years, but would produce savings
after that time. The near term cost increases occur because the reform permits the "early withdrawal"
of part of each member's future retirement benefit This proposal will not be endorsed by this
Administration. This will enable us to review current retirement policy and determine if any farther
changes are needed.
Operations — In addition to a review of the facilities and installations in order to achieve reductions
in overhead, a major effort will focus on contracting for commercial and industrial sendees.
Government policy, as specified by OMB Circulr No. A-76, is for maximum feasible reliance on the
private sector for goods and services. This policy is a matter both of free enterprise philosophy and of
efficiency. Savings are also expected from the Administration's review of administrative praactices
under the Davis-Bacon and Service Contract Acts. (See separate section on savings affecting many
agencies.)
Acquistion Management — Reduce or terminate marginal programs. The Defense Department has
identifed programs which can be cut back or terminated amounting to $.1 billion in 1981 and $1.0
billion in 1982.
There is room for additional improvement and cost savings in Defense acquisiton management.
Among the problems most commonly cited are the condition of Defense industry and Federal
regulations and policies and practices that influence i t These include over-capacity in some sectors
(e.g. major airframe contractors) which drive up overhead costs, and under-capacity in other sector
(e.g., nuclear ships) which limit competition and lead to production bottlenecks. The industry is also
under capitalized because of poor incentives for private investment, and there is limited capability to
respond to mobilization and surge requirements. Also, many Federal practices make the situation
worse; i.e.v too many regulations and too much paperwork.
One near term effort which can help to reduce acquisiton costs is to increase the amount of price
competition. Competition in- procurement is generally acknowledged to help in improving the quality
of any given product or service and in reducing its price. Numerous studies have shown that
competition in weapon systems and spares acquisition usually reduces prices by 10-40 percent Despite
regulations and management actions by DOD in support of competitive procurement, there has been
a steady decline in competitive procurement in Defense business because of the uncertainty of
weapons system production levels and design.
Multiyear procurement also offers potential economies. Current procurement contracting practices
require full funding of contracts on an annual basis. Procurement quantities are normally influenced
more by the amount of funds which can be allocated to the program that year than by consideration
of economical procurement quantities. As a result, defense contractors are inclined to plan on an
annual basis. Economies resulting from procurement of larger quantities of material from
subcontractors are lost and leadtimes are longer than necessary because firm planning for future year
production cannot be accomplished.
Productivity investments. Additional emphasis will be given to productivity enhancing investments
with high potential savings both in the Defense industrial base and in Government-operated facilities.
The revisions to the Defense budget include an increase of $90 million for these investments.

Key Facts About The Program
•

The Defense Department employs 1,025 thousand civilian and 2,120 thousand military
personnel costing $60.5 B in 1982.

•

Current Administration practices by the Department of Labor under the Davis Bacon and
Service Contract Act in making prevailing wage determinations for workers employed by the
Federal Goverment and sendee contracts result in costs to the Federal Government of
approximately 6-7% of total contract costs.

•

The Defense Department has 3,970 installations in the United States covering 24.5 million
acres.

•

Approximately $103 B will be spent for the development and acquisition of Defense systems
in 1982.

Water Resources Programs

Water Projects Unfunded
Agency: Department of
Defense—Civil

Functional
Code: 301

Funding
CARTER BUDGET:
Budget Authority
Outlays
REESTLMATES & ADJUSTMENTS:
Budget Authority
Outlays
PROGRAM CHANGES:
Budget Authority
Outlays
REAGAN BUDGET:
Budget Authority
Outlays

Budget Reform
Criterion: 5
f $ in millions)
19&4
1983

1981

1982

118
118

154
154

215
215

-2
-2

-10
-10
108
108

—

1985

1986

195
195

327
327

253
253

-15
-15

-76
-76

-103
-103

-47
-47

-115
-115

-200
-200

-119
-119

-224
-224

-206
-206

37
37

0
0

Program Description
January Budget funded Yatesville Lake, KY; Red River Waterway, LA; and Big South Fork National
River and Recreation Area, KY & TN at a level to insure project completion on an optimal schedule.

Proposed Change
The three projects are unfunded in FY 83-86 and remaining funds in FY 81-82 are to cover ongoing
contracts and round out existing facilities at the project sites.

Rationale
The fiscal retrenchment required by the President's economic plan requires a stretchout and
retargeting of public sector capital improvement programs. The three unfunded projects are examples
of public works expenditures with low economic return which can be deferred indefinitely as part of
die fiscal restraints required to meet the current economic situation.

Key Facts About the Program
•

All three projects are less than 20% complete

•

Remaining benefit/remaining cost ratios at 7 3/8% are
— Yatesville Lake 0.76
— Red River Waterway 0.64
— Big South Fork has no B/C Ratio

•

Yatesville Lake and Big South Fork have recreation as a primary benefit. Unfunding these
projects is consistent with Administration moratorium on the purchase of recreation lands

•

Red River Waterway has a large portion (35%) of less critical benefits — recreation, bank
stabilization, and area redevelopment

•

Red River Waterway has substantial environmental problems, and would raise water tables
causing flooding as far as 20 miles from the project

•

Red River Waterway costs are likely to increase substantially for non-inflationary reasons
since only 60% of project design work is complete

Extend Water Resource Development Construction
Agency: Department of Agriculture
Department of Defense-Civil
Department of the Interior

Functional
Code: 301

Funding
1982

($ in millions)
1984
1983

2415
2520

2660
2675

3167
3163

3359
3355

3252
3249

2930
2930

-0
-0

-43
-43

-97
-97

-139
-139

-158
-158

-0
-0

-95
-90

-340
-337

-545
-544

-515
-514

-215
-217

2415
2520

2565
2585

2784
2783

2717
2714

2598
2596

2557
2555

1981
CARTER BUDGET:
Budget Authority
Outlays
REESTEVIATES & ADJUSTMENTS:
Budget Authority
Outlays
PROGRAM CHANGES:
Budget Authority
Outlays
REAGAN BUDGET:
Budget Authority
Outlays

Budget Reform
Criterion: 5

1985

1986

Program Description
The construction program of these agencies develop the water resources of the nation for such
purposes as hydroelectric power, navigation, water supply, and recreation. These programs were
budgeted in January for optimal construction completion in FY83-86..

Proposed Change
The Administration proposes an 11% reduction in the planned construction program of the Corps of
Engineers-Civil, Water and Power Resources Service, and Soil Conservation Service.
This reduction will not delay the realization of hydroelectric, municipal water supply, navigation, or
urban flood control features; it will however, defer some less critical parts of projects such as the
development of recreation areas and some rural flood control and irrigation deliveries. It should be
noted that expenditures for water resource construction will continue to increase through FY 83, and
will still be higher in FY 86 than in FY 81.

Rationale
The fiscal retrenchment required by the President's economic plan requires a stretch-out and
retargeting of public sector capital improvement programs. Only 75 of the more than 300 projects
underway will incure delays in bringing non-critical features on-line. These delays will average about
two years and will reduce Federal expenditures by $1.6 billion over the next five years.

Key Facts About the Program
•

Only less critical features are posponed

•

Savings are maximized ($1.6 Billion) with minimal delay in bringing benefits on-line

•

Expenditures for water resource projects during FY82-86 will remain high - $13.2 billion.

Water Research and Technology
Agency: Department of the
Interior

Functional
Code: 301

Budget Reform
Criterion: 5

Funding
CARTER BUDGET:
Budget Authority
Outlays
REESTIMATES & ADJUSTMENTS:
Budget Authority
Outlays
PROGRAM CHANGES:
Budget Authority
Outlays
REAGAN BUDGET:
Budget Authority
Outlays

1981

1982

{$ in millions)
1984
1983

1985

1986

30.5
28.7

32.0
29.2

36.6
32.8

37.6
35.7

40.9
38.4

41.7
40.4

0
0

-34.7
-7.0

-32.0
-26.0

-36.6
-42.8

-37.6
-39.7

-40.9
-40.1

-41.7
-40.4

18.7
22.9

0
9.2

0
0

Program Description
The Office of Water Research and Technology's 1982 budget provided funds to support and carry out
research and development leading to solutions for state, local, regional, and national water problems
and to perform research and development for uses of saline or impaired waters. In addition, the FY
1982 budget contained a supplemental request for 1981 in the amount of $22.9 million for the
construction of the two saline demonstration plants — one at Virginia Beach, Virginia, and
Alamogordo, New Mexico.

Proposed Change
This Administration has deleted funding for the Office of Water Research and Technology for 1982. It
has also withdrawn the request for funding the construction of two saline demonstration plants.

Rationale
The proposal of this Administration to eliminate the OWRT is part of an overall effort to return to
private industry those programs that are more appropriately undertaken by that sector. The results
achieved by OWRT research efforts are applied directly to the resolution of state and local water
problems. Although these research and development efforts of the OWRT have produced some
worthwhile research results, the Administration believes that those results could have been achieved
equally well by the private sector.
Because of the concern expressed by the National Academy of Science in its recent report on Water
Resources Research Priorities concerning the financing of desalting technology by private industry, we
have deleted funding for the construction of the two proposed desalting plants.

Key Facts About the Program
The program provides grants to academic institutions and other research oriented entities or
individuals for research efforts to solve local, state, and national water problems. Such grants are
funded up to 100%
Regarding the construction of demonstration plants, desalting technologies are far enough along that
they can be applied without federal assistance.

Water Resources Council/Office of Water Policy
Agency: Water Resources
Council

Functional
Code:301

Funding
CARTER BUDGET:
Budget Authority
Outlays
REESTIMATES & ADJUSTMENTS:
Budget Authority
Outlays
PROGRAM CHANGES:
Budget Authority
Outlays
REAGAN BUDGET:
Budget Authority
Outlays

Budget Reform
Criterion: 6

1981

1982

(Sin millions)
1983
1984

24.8
22.6

39.4
36.8

42.3
42.9

-5.0

-36.9
-31.2
2.5 1 '
5.6 17

—

19.8
22.6

1985

1986

43.4
43.4

44.0
45.0

44.7
46.7

-40.3
-40.8

-41.4
-41.3

-42.0
-42.8

-42.7
-44.4

2.0
2.1

2.0

2.0
2.2

2.0

2,1

2.3

^
1982 Budget includes zero budget authority ($3.2M outlays) for the Water Resources Council; it also includes S2.5M
budget authority (S1.8M outlays) for the new Office of Water Policy

Program Description
The Water Resources Council was established in 1965 to foster improved State and regional water
planning, and coordinate Federal water activities. Eight departments with water resource programs
have been represented on the policy-making Council, which has been chaired by the Secretary of the
Interior.

Proposed Change
The Water Resources Council is being zero-funded, including a $5 million rescission in 1981 to
reduce carryover of activities into 1982.
A small Office of Water Policy will be established in the Department of the Interior.

Rationale
The existing organization has not been an effective means of implementing Federal policies. Because
decisions are by consensus, the WRC has been unable to deal with tough issues or resolve interagency
disagreements.
River basin commissions funded through the WRC have been unsuccessful at resolving inter-state
conflicts and have failed to produce a demonstrated improvement in regional planning.
WRC's State grant program has not resulted in improvements in States' water management
capabilities.
The new Office of Water Policy will advise the Secretary of the Interior on water policies. The new
Office will also oversee the timely completion of the Upper Mississippi Master Plan, due to the
Congress in January 1982.
The Administration will continue to examine water planning and development programs for additional
improvements.

Key Facts About the Program
Water Resources Council State Grants:
•

50/50 matched grants for water management and planning

•

$5 million rescission in FY 1981

•

To be eliminated because they have not produced an expansion of State planning capabilities

River Basin Commissions:
•

Funding for all 6 Federal/State commissions to be eliminated (New England; Ohio River;
Great Lakes; Upper Mississippi; Missouri River; Pacific-Northwest)

•

Not closely linked with other State planning and development activities

•

The required consensus decision-making has proven to be ineffective

Office of Water Policy (Interior):
•

Will provide advice to the Secretary of the Interior on water policies

•

Will partially fill vacuum created by zero-funding of the Water Resources Council

•

Will provide for completion in January, 1982, of the Upper Mississipi Master Plan

•

Will have personnel ceiling of 25

Other:
•

"Principles and Standards" (P&S) will continue to guide Federal water project planning

User Fees for Recovery of Costs for Construction and Operation of Inland
Waterways and Deep Draft Ports
Agency: Department of
Defense-Civil

Functional
Code: 301

Funding
CARTER BUDGET:
Budget Authority
Outlays
PROGRAM CHANGES:
Budget Authority
Outlays
REAGAN BUDGET:
Budget Authority
Outlays

Budget Reform
Criterion: 3

1981

1982

(S in millions)
1984
1983

1985

1986

-30

-58
-58

-67
-67

-82
-82

-90
-90

-110
-110

-248
-248

-483
-483

-515
-515

-550
-550

-585
-585

-306
-306

-550
-550

-597
-597

-640
-640

-695
-695

—
—

—

Program Description
The Department of Army (Corps of Engineers) has constructed, operated, and maintained the inland
waterway system with (beginning in 1981) only a nominal charge to users. It has also constructed and
maintained the deep draft harbors and channels at no charge to users.

Proposed Change
For the waterways the Administration is proposing, in addition to the current fuel tax:
•

A system of user fees consisting of, but not limited to, license -fees, ton-mile fees, lockage
fees, and congestion fees.

•

The fee system will recover;
— all operation and maintenance expenditures of the existing waterway system;
— amortized costs of replacing and rehabilitating the system;
— costs of new waterways on a phased basis, in recognition that it may take many years to
develop sufficient traffic on them to bear the full cost of repayment.

•

The fee system will extend to all waterways used in commercial transportation except those
privately constructed and maintained.

For deep draft harbors the Administration is proposing that:
•

The nation's port authorities (or other appropriate public bodies) agree to reimburse the
government for its expenditures for operations, maintenance and construction of navigation
channels and other improvements

•

Payment for new construction be amortized over 50 years with interest based on the yield of
government securities during construction, or

•

Port authorities and public bodies may find their own financing and reimburse the federal
costs during construction, in which case planning and construction could begin without
further Congressional authorization.

•

The port authorities and other public bodies will be able to pass on the cost of the federal
user charge by the same means they now cover landside and other port costs, subject only to
potential federal guidelines, where needed, to prevent inequities and abuses.

Rationale
These proposals are part of the administration's efforts to require payment for services rendered by
the Government when the users are clearly identifiable and the costs allocable. For inland waterways
and deep draft ports, the conditions are met. In addition the proposals will remedy long-standing
imbalances in the transportation system caused by continued subsidies to two segments of the
transportation industry. The subsidies are no longer needed as the industries are profitable and
growing.
80

Key Facts About the Program
WATERWAYS:
•

Built by Government at a cost of over $6 billion.

•

No charge to users until 1981 when 4 cents per gallon tax instituted.

•

Garry over one sixth of nation's intercity tonnage.

•

Average increase in fees will increase costs less than 0.4 cents per ton mile.

HARBORS:
•

Federal costs for harbor channel dredging exclusive of Navy and other non-commercial
governmental costs are currendy about $225 million per year.

•

Non-Federal costs for landside port facilities, berth dredging, and dredge spoil disposal are
much larger than Federal channel dredging costs.

•

Federal dredging costs are small compared to the value of cargo moved in international trade
(about $400 billion annually).

•

Federal port user charges would be small in porportion to the operating costs of vessels
engaged in trade (about 0.5 to 2 percent, depending on type).

Department of Education

College Housing Loans
Agency: Department of
Education

Functional
Code: 502

Funding
CARTER BUDGET:
Budget Authority
Outlays
REESTEV1ATES & ADJUSTMENTS:
Budget Authority
Outlays
PROGRAM CHANGES:
Budget Authority
Outlays
REAGAN BUDGET:
Budget Authority
Outlays

Budget Reform
Criterion: 6
($ in millions)
1984
1983

1981

1982

15
32

13
3

12
3

-15

-13
-4

-1

1985

1986

12
3

-12
-30

-12
-75

-12
-86

-12
-85

-27

-72

-83

-82

-18

Program Description
The Department of Education provides three percent loans, from a revolving account which consists
of funds borrowed from the Treasury, to colleges for the construction and rehabilitation of student
housing. Collections from past loans replenish the loan fund and new budget authority is used to
meet the difference between interest earned on the loans and the cost of Treasury borrowing. The
1982 Carter Budget proposed to make $95 million available for new lending activity.

Proposed Change
Under the Adminstration's proposal:
-

No new College Housing Loans would be made

Collections would be used to meet interest insufficiencies with any remainder going to the
Treasury to retire outstanding debt.

Rationale
This proposal is a component of the Administration's effort to impose fiscal constraint. With the
college age population projected to decline in the next few years there is no national need to expand
the capacity of colleges. If loan projects are cost-effective then it is simply unnecessary for the
Federal Government to provide subsidized capital as there is already an incentive for the use of
private capital. This proposal is consistant with the Administration's objective to reduce and control
Government intervention in the Nation's private credit markets by reducing the borrowing
requirements of the Treasury by returning $265 million to it between 1982 and 1986.

Key Facts About the Program
•

Prior to the Administration's proposal an appropriation for the payment of participation sales
insufficiencies has needed to be requested. The insufficiency results from the difference
between the 5 to 6 percent rate of interest paid on the participation certificate and the 3
percent rate of income received on an equal amount of loans. The Administration's proposal
would pay insufficiencies from repayments to the account.

•

No new loan commitments for college housing" will be made. The nation is no longer facing
rapidly expanding postsecondary enrollments and the need for college housing has largely
been met. There is no longer a clear Federal role in this area.

•

The capital for this program came from the Federal Financing Bank (FFB), and the
termination of new loan awards will allow the program to begin reducing its debt to the
FFB. The return of this capital to the FFB will reduce the Treasury's future borrowing
requirements in the private market.

Elementary and Secondary
Education Block Grants
Agency: Department of
Education

Functional
Code: 501

Funding
1982

1981

Budget Reform
Criterion: 7
($ in millions)
1984
1983

CARTER BUDGET:
5,400
5,837
6,386
Budget Authority*
5,214
4,655
5,573
Outlays
REESTO1ATES & ADJUSTMENTS:
-210
Budget Authority
—
—
-42
Outlays
PROGRAM CHANGES:
-1.527
-1,597
Budget Authority
-1,398
1,684
1,122
-113
Outlays
REAGAN BUDGET:
4,579
4.356
Budget Authority
4,060
305*
3,366*
Outlays
4,483
•These outlay figures reflect spend out of block grant only, not prior programs.
"Represents a composite of existing programs.

1985

1986

6,853
6,016

7,293
6,478

7,757
6,897

-166
-156

-111
-159

-108
-113

-1,878
1,568

-2,133
1,623

-2,347
1,805

4,809
4,292*

5,049
4,696*

5,302
4,979

Program Description
For over a decade and a half, Federal involvement in elementary and secondary education has taken
the form of a series of categorical programs. In areas thought to be of national interest, the FederalGovernment devised separate programs, each with specific objectives, priorities, and recipients.
Implementation of these programs has resulted in individual appropriations, regulations, and
paperwork requirements and has stimulated the establishment and continued growth of separate
administrative structures for each categorical program at the Federal, State, and local levels.

Proposed Change
The Administration proposes to consolidate about 45 separate Federal elementary and secondary
education programs into two "block grant" programs.

Rationale
While there is little doubt that these Federal categorical programs were intended to address real
problems, some of which persist, and that at least some of these programs have demonstrated a
measure of success, observers of the American educational enterprise have become increasingly aware
of the weaknesses inherent in the current approach. Federal program requirements have become
complex and confusing. Compliance has imposed heavy and growing burdens on State and local
agencies and is frequently, from an educational point of view, counterproductive. Meeting Federal
mandates has drawn increasing sums away from services into administration and other overhead costs.
The current categorical approach has also distorted the division of responsibility originally built into
the Federal system. Control of educational policy has gravitated toward the national government
rather than remaining at State and local levels. Many Federal programs sprang from the realization
that, for various reasons, particularly a lack of funds, State and local agencies were unable to meet
certain national needs. Federal efforts have continued without regard to widespread and significant
changes within State and local educational agencies. Current Federal programs ignore State and local
projects designed to serve the same populations and meet the same needs. An adversarial relationship
between the Federal Government and State and local educational agencies has persisted far too long,
however.
At the school and classroom levels, similar problems have emerged. Children in need of special
services have failed to receive the required attention because they did not fit neatly into a Federal
category; some children have lost out because they rightly belong in more than one category. Schools
have adopted educational methods and strategies with an eye toward Federal fiscal controls and

regulatory restrictions rather than pedagogical values or local conditions. Rules and instructions
intended for all the Nation's 16,000 school districts often have seemingly suited none. School
administration has become, in some areas, as fragmented as Federal policies.
The 1982 Budget, therefore, proposes block grants as the key vehicle for supplying financial resources
to States and local educational agencies for elementary and secondary educational services.

Key Facts About the Program
•

The Block Grants are intended to reform and redirect Federal involvement in elementary
and secondary education. They will provide financial resources to States and local school
districts so that they can serve various populations in need of special educational services.
They will entail minimal regulatory and administrative burdens and allow maximum
flexibility to design programs suited to special populations and with regard for State and
local needs and circumstances. The 1982 Budget requests funding for school year 1982-83 of
$4.4 billion.
Funding
Budget Authority by Activity
1980
Actual

Estimate

1981
Revised
Estimate

1. State and local education
block grants

$4,356,924,000
($6,020,000)

($5,200,000)

($4,780,000)

2,630,022,000

2,824,880,000

2,118,660,000

98,325,000

142,142,000

106,606,000

107,800,000

80,850,000

Special programs
and projects^

84,419,000

75,083,000

56,312,000

Magent schools, pairing,
and neutral site schools

36,302,000

30,000,000

22,500,000

922,000,000

691,500,000

25,000,000

18,750,000

100,000,000

120,000,000

9,000,000

18,625,000

18,125,000

12,625,000

145,000,000

165,000,000

123,750,000

Neglected and delinquent

32,291,655

37,750,000

28,312,000

State administration

48,318,628

47,000,000

5,450,000

Evaluation (technical
assistance centers)

13,475,000

8,000,000

5,450,000

Improving local educational
practice

146,400,000

91,400,000

50,000,000

Strengthening State educational agency management

51,000,000

38,250,000

Program evaluation^
Grants for disadvantaged:
Basic grants to local educational agencies
State agency migrant
grants^
Emergency school aid:
Basic grants to local
education agencies

Education for the Handicapped:
State grant program
874,500,000
Preschool incentive
grants
25,000,000
Adult education:
Grants to states
Basic skills improvement^
Handicapped

1982
Estimate

5,200,000

Emergency school aid:
Special programs and
projects (SEA incentive
grants, multicultural arts,
and assistance to Territories).

$7,600,000

$8,500,000

$6,375,000

Grants to nonprofit
organization

5,000,000

7,500,000

5,625,000

Educational television and
radio

6,450,000

34,256,000

Training and advisory
services

45,675,000

34,256,000

Women's educational equity

10,000,000

7,500,000

School libraries and instructional resources

171,000,000

128,250,000

5,919,991

5,000,000

3,750,000

18,739,927

18,800,000

13,800,000

594,726

2,200,000

1,20Q,000

Innovation and development
(demonstration projects
and technical assistance)

8,085,000

7,750,000

2,750,000

Regional resource centers

9,760,688

9,750,000

7,312,000

Special education personnel
development

55,375,000

58,000,000

43,500,000

Career education incentive
(State grants and model
projects)

14,825,000

14,775,000

9,850,000

Community schools

3,138,000

10,000,000

3,138,000

Consumers' education

3,617,000

2,713,00

Law-related education

1,000,000

1,000,00

750,000

Basic skills improvement
(Part A—technical assistance,
parental involvement, and
involvement of educational
agencies; and Part B —
State leadership)

13,375,000

11,425,000

Follow through (LEA service
projects and sponsors)

39,144,000

35,250,000

28,187,000

Gifted and talented (Stateadministered grants,
Statewide activities, and
model projects)

5,400,000

3,830,000

Alcohol and drug abuse
education

3,000,000

2,250,000

Education for the
handicapped: Severely
handicapped
Early childhood education
(demonstration, outreach,
State implementation, and
technical assistance)
Regional vocational, adult,
and postsecondary and adult
demonstration projects)

$3,500,000

$2,625,000

Metric education (All
activities except evaluation)

1,840,000

1,715,000

1,255,000

Ethnic heritage studies

3,000,000

2,250,000

Cities in schools

3,050,000

2,287,000

PUSH for excellence

1,000,000

750,000

30,000,000

29,000,000

21,500,000

2.500.000
$5,142,167,615

2.500.000
$5,446,987,000

1.875.000
$4,048,274,000

Arts in education

Teacher corps (All activities
except evaluation)
Pre-college science teacher
training
Total, budget authority
^

$4,356,924,000

The figures for the program evaluation represent a share of funds available for evaluation within
programs with purposes generally comparable to State and Local Education Block Grants. These
programs include Grants for Disadvantaged, emergency School Aid, Education for the Handicapped,
Career Education, Metric Education and Teacher Corps.
Does not include funds set aside for Evaluation and State Administration.

Includes only funds for out-of-cycle grants, severe unmet needs, local educational agency
planning, grants, pre-implementation
assistance,
special discretionary
assistance,
and
capability-building contracts.

Includes only funds for instruction in basic skills, agreements with State educational agencies,
inexpensive book distribution, and special mathematics program.

Higher and Continuing Education
Agency: Department of
Education

Functional
Code: 502

Funding
CARTER BUDGET:
Budget Authority
Outlays
REESTIMATES & ADJUSTMENTS:
Budget Authority
Outlays
PROGRAM CHANGES:
Budget Authority
Outlays
REAGAN BUDGET:
Budget Authority
Outlays

1981

1982

380
385

429
371

Budget Reform
Criterion: 6
(S in millions)
1983
1984

1985

1986

437
417

485
446

514
476

544
506

-27

-56
-24

-85
-46

-109
-75

-8
-3

-49
-15

-46
-43

-50
-47

-50
-53

-57
-54

372
382

380
356

380
374

379
375

379
377

378
377

Program Description
This account is composed of 16 programs that encourage institutions the Department of Education
funds to meet the needs of special populations, support institutional change and support study in
fields of national concern.

Proposed Change
Under the Administration's proposal:
Funding for the Veteran's Cost of Instruction Program, Educational Outreach Programs, and
Law School Clinical Experience would be eliminated.
Funding for International Education, Fellowships for graduate and professional study and
Law-Related Education would be reduced.

Rationale
This proposal is a component of the Administration's effort to impose fiscal restraint on other
programs of national interest. These programs are not targeted on the truly needy. The programs
proposed for no further funding have outlived their usefulness in helping during the post-Vietnam
transition or demonstrating the viability of university/community cooperation, State postsecondary
planning, and certain teaching methods. The programs reduced have no clear relevancy to a national
need or do not merit expansion in an era of budget reductions.

Key Facts About the Program
The Administration's proposal would effect eight programs:
1. Veterans's Cost of Instruction Program (VCIP)
The Administration's proposal will:
-

Rescind $12,039,000 appropriated for VCIP in 1981. Approximately 1,025 awards would not
be supported.
Request no funds in 1982.

This program:

Provides specialized services to potentially enrolled and enrolled veterans. Grants are made
to institutions of higher education and are used to maintain a full-time Office of Veterans'
Affairs and provide outreach, recruitment, special educational services and counseling;
Makes grants on the basis of the number of verterans enrolled and receiving veterans'
educational or vocational rehabilitative services. Additionally bonus payments are made for
veterans who are educationally disadvantaged or disabled.

Was created in 1972 to respond to the special adjustment needs of the Vietnam era veterans.
The peak year of veteran enrollment in postsecondary education was 1976 when there were
approximately 910,000 enrolled veterans who were eligible for services under VCIP.
Projections indicate that eligible enrollment is likely to fall below 276,000 in 1981.
Institutions should now be able to absorb this smaller number of veterans into their
traditional counseling and service programs.

2) International Education - Domestic Program
The Administration's proposal will:
-

Rescind $4.8 million of the $21.8 million appropriated in 1981, which would result in a
reduction in the size of the grants to 80 International Study Centers, though the average
grant still represents an increase of $7,000 over the 1980 level. In addition, 73 fewer
academic fellowships, 56 fewer international understanding projects would be supported than
at the Continuing Resolution level.

Hold the program to the 1980 level in 1982.

3) International Education - Overseas Program
The Administration's proposal will:
-

Rescind $3.2 million of the $6.6 million appropriated in 1981, which would reduce total
funding for these programs to $3,000,000, the same as the 1980 level. From the Continuing
Resolution level, the rescission would reduce the number of group projects abroad supported
by 14, faculty research abroad projects by 36, doctoral dissertation research abroad projects
by 57, curriculum consultants by six, and special bilateral projects by seven.

Hold the program to the 1980 level in 1981.

4) Educational Outreach Programs
The Administration's proposal will:
-

Rescind $12.8 million of the $15 million appropriated for the Educational Outreach
programs. Fifty-seven States and Outlying Areas will not receive Federal funding to increase
access to continuing education programs for adults whose educational needs have been
inadequately served.

Request no funds for these programs in 1982, as potential recipients of grants under this
program are already taking steps to increase access to postsecondary continuing education for
the underserved adult population without Federal funds being used as an incentive. This is
particularly true in the case of institutions of higher education and others, which face a
decline in the enrollment of traditional-age students, have an economic incentive to engage
in continuing education activities and to reach out previously unserved individuals.

5) Fellowships for Graduate and Professional Study
The Administration's proposal will:
-

Rescind the 1981 appropriations for Public Servic Fellowships and Mining and Mineral
Conservation Fellowships and requests no funds for these programs in 1982.
—

Rescissions of $2,000,000 for Public Service Fellowships and $1,150,000 for Mining and
Mineral Conservation Fellowships are requested of the $14,150,000 appropriated for
Fellowships for Graduate and Professional Study. Approximately 375 fellowships would
not be awarded. The remaining $11,000,000 would be used to support individuals from
traditionally underrepresented groups undertaking graduate or professional study.

—

The market place appears to be sufficient incentive to encourage students to enter
mining-related fields of study. For example, the average starting salary of graduates
with bachelor's degrees in petroleum engineering is reported to be higher than any other
field. Because of these attractive financial rewards, enrollments at mining schools have
skyrocketed. In a time of generally declining enrollments, mining institutions are
experiencing an annual 20 percent increase in applications.

—

Many institutions currently offer high level, high quality graduate programs in the
public service field, and there already exists at this time a substantial supply of qualified
persons to fill public service jobs. In addition, governments at all levels are hiring
significantly more persons with degrees in specific academic disciplines such as law,
economics, and engineering rather than persons with broad public administration
degrees. Federal government-wide hiring restrictions will depress the need for new
graduates even more.

Reduce the 1982 Carter request for Graduate/Professional Education opportunities to the
1981 level.

6) Architectural Barrier Removal
The Administration's proposal will:
—

Rescind $10 million appropriated in 1980 and deferred to 1981.
—

The only appropriation this program has received occurred in 1980". Subsequent to this
appropriation, analysis of two federally sponsored studies determined that total higher
education renovation costs for compliance with Section 504 of the Rehabilitation Act of
1973 were far less than originally assumed. Moreover, these studies indicated that the
cost burden for the overwhelming number of colleges and universities was relatively
small.

—

Of the original $25,000,000 1980 appropriation, $15,000,000 was rescinded in the
Supplemental Appropriation and Rescission Act 1981. TTiis appropriation would provide
less than $150,000 to two-thirds of the States and Outlying Areas. This amount would
then be allocated among eligible institutions within a State. The administrative burden
at both the State and institution level would be considerable.

7) Law School Clinical Experience
The Administration's proposal will:
-

Rescind the $3 million appropriated in 1981. Approximately 60 demonstration projects in
clinical legal education, some of which would be at schools which have already received
awards in previous years, would not be supported.
-

Request no funds for the program in 1982.
—

When initially funded in 1978, this program was to have supported one time only
demonstrations to stimulate accredited law schools to establish or expand clinical training
programs for law students in the actual practice of law. The Federal objective to
demonstrate the value of clinical experience in the education and training of law
students has been met and additional funding is not required.

—

Since 1978, 168 demonstration projects have been supported. Furthermore, private
groups continue to demonstrate the importance of clinical legal experience.
For
example, the Ford Foundation-sponsored Council on Legal Education for Professional
Responsibility; Inc. (CLEPR) has spent approximately $7,000,000 over the past ten years
to support die demonstration and development of approximately 100 clinical legal
education programs.
Now that the concept of- clinical legal training has been
demonstrated, it should be the individual institution's responsibility to support the
operation of these programs.

8) Law Related Education
The Administration's proposal will:
—

Rescind $250 thousand of the 1981 appropriation for this program.

—

Request no funding for the program in 1982.
—

This program provides funds for curriculum development that should be supported by
local funds.

School Assistance in Federally Affected Areas (Impact Aid)
Agency: Department of
Education

Functional
Code: 501

Funding
CARTER BUDGET:
Budget Authority
Outlays
REESTEVIATES & ADJUSTMENTS:
Budget Authority
Outlays
PROGRAM CHANGES: 17
Budget Authority
Outlays
REAGAN BUDGET:
Budget Authority
Outlays

1981

1982

642
799

401
443

81
74

-7

723
873

401
450

Budget Reform
Criterion: 6
(S in millions)
1984
1983

1985

1986

436
426

471
455

504
488

535
520

-35
-25

-70
-55

-103
-88

-134
-119

401
401

401
400

401
401

^ T h e Carter budget also included savings for this program from current services estimates.
services would be:
1981
1982
1983
1984
Budget Authority
-67
-474
-552
-631
Outlays
-59
-438
-567
-647

Total savings from current
1985
-706
-727

1986
-777
-795

Program Description
The Impact Aid program compensates school districts whose local revenues are adversely affected by
Federal activities. Payments are made direcdy to local school districts and used for operating expenses
and in some cases, for construction. Payments are currently made on behalf of children who reside
and/or whose parents work on Federal property. Payments are being made in 1981 to approximately
3900 school districts.

Proposed Change
For 1981, the Administration proposes to:
•

Reduce the funds currently available for the maintenance and operations portion of the
Impact Aid program by $67 million.

•

Make payments to all eligible school districts at 90% of their entitlement under the
Continuing Resolution.

•

Make payments on behalf of all children currently eligible for the program, .those who live
on Federal property and/or whose parents work on Federal property.

For 1982, the Administration proposes to:
•

Pay school disticts only for those children who live on Federal property and whose parents
work on Federal property ("A" children).

•

Make payments only to those school districts most heavily burdened by the presence of these
children. The Impact Aid law defines such "Super A" districts as districts in which children
who live and whose parents work on Federal property comprise 20% or more of the district's
total enrollment.

•

"Super A" districts will receive payments at the rate of 90% of their entitlement for their
"A" children and at 20% of entitlement for the "A" children who live in low-rent housing.

Rationale
The 1981 rescission represents a first step toward the major restructuring of the Impact Aid program
proposed in 1982. It recognizes that while the current school year is more than half completed, many
districts receiving aid under this program are being overcompensated for the effects of the Federal
burden. The 1982 proposal recognizes that, in a time of budgetary restraint, it is no longer possible to
justify Federal assistance to school districts for children whose parents pay local property taxes but
who happen to work on Federal property. Payments will be made to the 330 districts most burdened

by Federal activities, while State and local agencies would resume full responsibility for more than
3,500 districts that currently receive assistance.

Key Facts About the Program
School Districts in the Impact Aid Program:
•

3900 school districts are receiving payments in 1981.

•

2200 school districts receive payments only for "B" children, those whose parents work for
the Federal government.

•

330 districts qualify as "Super A" districts.

Children for Whom Payments Are Made:
•

Over 2.2 million children either live on Federal property and/or have parents who work on
Federal property.

•

Only 340,000 children (15% of the total) live on Federal property and have parents who
work on Federal property. Most of these "A" children are children of military personnel or
are Indian children living on Indian lands.

•

Most "B" children either live in low-rent housing or live on private property and have a
parent who works on Federal property.

Institute of Museum Services
Agency: Department of
Education

Budget Reform
Criterion: 6

Functional
Code: 503

Funding
CARTER BUDGET:
Budget Authority
Outlays
REESTEMATES & ADJUSTMENTS:
Budget Authority
Outlays
PROGRAM CHANGES:
Budget Authority
Outlays
REAGAN BUDGET:
Budget Authority
Outlays

1981

1982

1983

in millions)
1984

12.9
13.0

16.9
15.0

18.3
16.2

1985

1986

19.7
17.4

20.9
18.5

22.3
19.7

-1.4
-0.3

-2.8
-1.7

-4.0
-3.1

-5.4
-4.1

-16.9
-15.7

-16.9
-15.4

-16.9
-15.6

—

-12.4
-0.1

-16.7
-8.4

-16.9
-12.7

0.5
12.8

0.2
6.1

3.2

Program Description
The Institute of Museum Services provides grants to museums principally for general operating
support.

Proposed Change
The Administration proposes to terminate the Institute of Museum Services.
•

Funds for grants to museums will be rescinded in 1981 and eliminated in 1982;

•

Minimal amounts for program administration are provided in 1981 and 1982 in order to
effect the orderly phase down of the Institute's activities.

Rationale
This proposal is part of an overall Administration effort to rethink Federal support of cultural
activities. While museums and other repositories of cultural artifacts are important in our society, they
have traditionally been the beneficiaries of private philanthropy, for both construction and operating
funds.
While in recent years inflation has impaired the ability of museums to operate, the Administration
proposes to attack these problems directly, through its overall economic program. A healthy economy
will provide more resources for cultural activities without the need for Federal support.

Key Facts About the Program
•

The Institute provides grants to museums, principally for general operating support. Federal
support for operating expenses of museums is not an appropriate Federal function.

•

Many of the activities of the Institute overlap with the museum programs and the challenge
grant programs, of the Arts and Humanities Endowments.
1981
Jan. Budget

Funding
Institute for Museum Services
Grants to Museums
Program Administration
Museum Services Board

-12,267
520
70

($ in thousands)
1981
1982
Revised
Jan. Budget
50
401
49

16,267
616
54

1982
Revised

220

1980

1981
Jan. Budget

Type of Grant
General Operating Support
$
Number of grants
Average Award ($)
•

1981
Revised

1982

9,500,000 11,300,000
365
450
26,027
25,111

General operating support grants provide general operating support for unrestricted museum
activities. IMS awards one-year grants on a competitive basis to eligible museums.

Special Projects

1980

Model Projects
$
Number of grants
Average Award ($)

899,000
43
20,906

1981
Jan. Budget

1981
Revised

700,000
35
20,000

50,000
2
25,000

1982
Revised

•

Emergency grants provide a maximum grant of $25,000 to museums that have been damaged
by a natural disaster.

•

Special project grants are one-year innovative and exemplary projects.

Accreditation and Assessment Grants
-- -

$
Number of Awards
Average Award ($)

267,000
417
640

•

Accreditation grants provide eligible museums with a one-time grant of $800 to help defray
the costs of accreditation by an appropriate national association.

•

Museum assessment grants provide a one-time grant of $600 to'aid museums in paying the
costs associated with assessing the quality and effectiveness of their operations.

Library Programs
Agency: Department of
Education

Functional
Code: 503

Funding
CARTER BUDGET:
Budget Authority
Outlays
REESTEVIATES & ADJUSTMENTS:
Budget Authority
Outlays
PROGRAM CHANGES:
Budget Authority
Outlays
REAGAN BUDGET:
Budget Authority
Outlays

Budget Reform
Criterion: 6
(S in millions)
1984
1983

1981

1982

68
67

78
73

80
71

-31
-3
47
70

68
67

1985

1986

87
87

95
92

97
100

-33
-10

-40
-33

-48
-43

-50
-52

47
61

47
54

47
49

47
48

Program Description
College library grants are awarded to institutions of higher education for the acquisition of library
materials and for networking activities. Public library funds are provided to establish, expand and
improve public library services and are targeted on the unserved, disadvantaged, institutionalized,
handicapped, limited english speaking and older persons. A portion of the funds are reserved for
major urban resource libraries.

Proposed Change
The Administration proposes to:
•

Terminate the college library program in 1982.

•

Reduce the public library program by 25% in 1982.

•

Continue funding the interlibrary cooperation program at the current services level. This
program provides funds to facilitate cooperative efforts among libraries.

Rationale
The college library program provides equal grants to virtually all institutions of higher education in
the Nation, thereby reducing the awards to an insignificant level. The Federal government provides
only 5% of all funds expended for public libraries in the Nation. Local agencies spend 82% while
State governments spend 13%. Public libraries are a State and local responsibility and State support
for public libraries should increase.
Fostering cooperative library projects is clearly a more
appropriate Federal role.

Key Facts About the Program
•

Funds for the public library services program are distributed to States through a formula
based on total residence population, but with a $200,000 minimum for the 50 states, D.C.,
and Puerto Rico, and a $40,000 minimum for the other outlying areas. The State and local
matching requirement ranges from 33 percent to 66 percent (except for the Trust Territory
which is 100 percent federally funded), with States providing matching funds in proportion
to their per capita income.
•

•

The legislation of the public library services program authorizes additional funds for major
urban resource libraries through an appropriation trigger provision. When the appropriation
for this program exceeds $60,000,000, cities with over 100,000 population share 50 percent of
the excess over $60,000,000 with the remainder to be used at the discretion of the States
within the program purposes.

•

In 1981 public library grants ranged from $7 million and $5 million to California and New
York, respectively, to $303 thousand to North Dakota.

344-211

97
0-81-4

•

The interlibrary cooperation program provides funds to States according to a formula based
on total resident population, but with a minimum of $40,000 for the 50 States, D.C., and
Puerto Rico, and a $10,000 minimum for the other Outlying Areas. No State matching is
required.

•

Between 20 and 30 percent of the funds awarded as subgrants by the States go to urban
library systems.

•

Funding:

Carter
Public Libraries:
1981
63
Budget Authority ($ in millions)
Persons Serviced (in millions)
Disadvantaged
30
Physically Handicapped
1
Institutionalized
1
Older readers
8
Interlibrary Cooperation
Budget Authority ($ in millions)i 12
No. of cooperative library
projects
310
Percent of nation's
libraries involved
35
College Libraries
Budget Authority ($ in millions)
5
2,600
No. of awards
Average award
$ 2,000

Reagan
1982
63

1981
'63

1982
47

30
1
1
8

23
1
1
2

325

310

275

5
2,600
$ 2,000

5
2,600
$2,000

—
—

National Institute of Education
Agency: Department of
Education

Functional
Code: 503

Budget Reform
Criterion: 6

Funding
CARTER BUDGET:
Budget Authority
Outlays
REESTLMATES & ADJUSTMENTS:
Budget Authority
Outlays
PROGRAM CHANGES:
Budget Authority
Outlays
REAGAN BUDGET:
Budget Authority
Outlays

1981

1982

79
82

84
81

—

($ in millions)
1984
1983

1985

1986

92
86

99
91

106
96

113
102

-9

-15
-7

-20
-12

-25
-18

—

-5
-3

-23
-22

-22
-20

-23
-20

-25
-21

-27
-22

74
79

61
59

61
66

61
64

61
63

61
62

Program Description
NIE funds research and demonstration activities in three areas: basic educational research, educational
organization and administration, and dissemination of the results of research and demonstrations to
practitioners in the field.

Proposed Change
The $5 million supplemental proposed by the Carter Administration for 1981 will be withdrawn and
funding in 1982 and succeeding years will be reduced by 25%.
Carter
1981
596
17

No. of awards
No. of labs & centers funded

1982
671
17

Reagan
1981
1982
561
260
17
17

Rationale
The activities of the Institute, white occasionally making valuable contributions to the theory and
practice of education, are of relatively low priority given present budgetary conditions. This proposal
provides the Secretary of Education with considerable flexibility to reallocate remaining funds toward
those efforts that will result in continued improvements in education.

Key Facts About the Program
•

NIE has devoted an increasing amount of program funds into fundamental research — 20%
in 1979 increasing to 30% by 1985.

•

Teaching and Learning — Program Data

Activity Description
Students and schools using
instructional materials developed by:
— Southwest Regional Laboratory
for Educational Development

FY 1980

Students
1,050,000
Schools
6,375
— CEMREL Comprehensive School Math Program
Students
Schools
Teachers

50,350
316
1,665
99

FY 1981
(Projection)

FY 1982
(Projection)

1,200,000
6,500

1,300,000
6,500

57,850
380
1,915

65,300
440
2,165

•

Educational Policy and Organization — Program Data

Activity Description
Local education agencies, universities and
other organizations using information
developed through NIE-funded projects
on desegregation:
— Special publications on desegregation
trends, judicial decisions, research
methods, and minority students
•

FY 1981
(Projection)

FY 1982
(Projection)

25,000

30,000.

28,000

FY 1980

FY 1981
(Projection)

FY 1982
(Projection)

680

695

715

370,000
150,000

410,00
175,000

443,00
210,000

19
4,726,600

22
5,103,400

Dissemination and Improvement of Practice - Program Data

Activity Description
Educational Resources Information Center
(ERIC) giving practitioners and researchers
easy access to report and journal literature
covering a wide range of educational issues
— Libraries subscribing to entire
collection of ERIC microfiche
— Total number of documents and
journal articles cited in ERIC files
— Number of computer searches of ERIC
Enrollment of urban districts served
through the activities of an urban
superintendents' dissemination network:
— Districts Served
— Student Enrollment

FY 1980

100

Special Population Programs

Agency: Department of
Education

Functional
Code: 501,502

Funding
CARTER BUDGET:
Budget Authority
Outlays
REESTIMATES & ADJUSTMENTS:
Budget Authority
Outlays
PROGRAM CHANGES:
Budget Authority
Outlays
REAGAN BUDGET:
Budget Authority
Outlays

1981

1982

551
453

631
531

Budget Reform
Criterion: 6
($ in millions)
1984
1983

1985

1986

695
619

743
678

799
736

855
791

-64
-16

-112
-52

-168
-106

-224
-160

-54
-4

-117
-79

-117
-116

-117
-117

497
449

514
452

514
487

514
509

514
513

514
514

Program Description
The Indian Education program supports educational services for Indian students through three
programs. Part A provides formula and competitive grants to school districts with Indian children to
improve their academic performance, reduce dropout rates and expand culturally relevant educational
materials. Part B supports discretionary grants to individuals, Indian tribal governments, and
organizations to promote Indian participation in programs which involve them and in society in
general. Part C supports discretionary grants to Indian tribes, organizations and institutions to
improve educational opportunities for Indian adults who have not completed high school.
The Bilingual Education program supports the development of bilingual education programs in local
schools to help children of limited English proficiency learn English while they develop subject matter
skills. The Bilingual Vocational Training program supports vocational training, vocational instructor
training, and development of bilingual instructional materials, methods and techniques.
The Strengthening Institutions program provides funds to eligible two and four year colleges for the
improvement of their fiscal management, administration and academic programs. Grants of from 1 to
5 years are made and a comprehensive development plan is required. Current law requires that 24 to
30% of the funds go to two year colleges and holds harmless the traditionally Black colleges to a
funding level not less than 50% of what they received in 1979. In 1979, Black colleges received
approximately $65 million out of a $120 million appropriation.
Special Programs for the Disadvantaged awards several types of discretionary grants to encourage and
assist disadvantaged youths to enter, continue or resume postsecondary education. Upward Bound
and Talent Search provide grants for tutorial and counseling services to high school or other youth
with college potential. Special Services grants are made to increase tutorial and counseling support of
disadvantaged college students. Education Opportunity Centers provide information on colleges and
available financial aid.

Proposed Change
—

Reduce the average cost per student under Part A of the Indian Education program to $161
rather than permitting an increase to $213. Reduce the number of service projects under
Part B to 19, the 1981 level, reduce the numbers of participants in educational personnel
development projects and eliminate a new State level coordination project Reduce the
numbers of Indian adults participating in literacy programs from 9,000 to 8,456.

—

Reduce the Bilingual Education program arid the Bilingual Vocational Education programs to
75% of the 1981 Continuing Resolution level in 1981 and 80% of the 1981 Continuing
Resolution level in 1982. In order to implement these changes, the Administration will
withdraw the Carter budget request for a $9 million supplemental, propose rescissions
totaling $45 million in 1981 and reduce the 1982 request by $65 million.

101

—

Reduce the Carter budget proposed increase for Strengthening Institutions from $33 million
to $9 million. The $9 million would be used to initiate the new challenge grants program.

—

Eliminate the Carter proposed increase of $7 million for Special Programs for the
Disadvantaged. These programs have expanded rapidly in the last several years from a
funding level of $70 million in 1975 to $148 million in 1980.

Rationale
This proposal is a component of the Administration's effort to impose fiscal restraint on other
programs of national interest Reductions in the Bilingual Education program are necessary in order
to reduce Federal spending in low priority programs. While the Indian Education program serves a
disadvantaged population, it has grown significantly in recent years in the absence of evidence of
positive benefits to participants. Even with this reduction, the program will be funded at the 1981
level. The reduction in funds to Strengthening Institutions will maintain the program above the 1981
level and fulfill the President's commitment to the support of Black Colleges. The Special Programs
for the Disadvantaged funding will be continued at the 1981 level.

Key Facts About the Program
Bilingual Education

Reagan

1981

190

209

135

144

624

641

426

431

334,124

362,528
560

222,968
500

234,760

560
43

102
1,180

82
1,175

81
1,180

325,000
$165

326,000
$161

213

205

120

130

Budget Authority ($ in millions)
No. of demonstration and
capacity-bldg. projects
No. of students
participating

Carter

1982

1981

No. of fellowships
No. of training institutes

1982

560

Indian Education
Budget Authority ($ in millions)
No. of Part A awards
No. of students
participating
Average student expenditure

1,175
325,000
$165

No. of fellowships

326,000

213

$213
205

120

153

373

207
231
25
463

15
373

431

450

167
450

160
450

617

173

617
173

Strengthening Institutions
Budget Authority (S in millions)
No. of strengthening
institutions awards
No. of special needs awards
No. of challenge grants
TOTAL AWARDS

203
213

Special Programs for the Disadvantaged

160

Budget Authority ($ in millions)
No. of Upward Bound awards
No. of Special Services
awards
No. of Talent Search awards
No. of Educational Opportunity
Centers awards
No. of Training program awards

102

Student Assistance
Agency: Department of
Education

Functional
Code: 502

Funding
1981
CARTER BUDGET:
Budget Authority
Outlays
REESTLMATES & ADJUSTMENTS:
Budget Authority
Outlays
PROGRAM CHANGES:
Budget Authority
Outlays
REAGAN BUDGET:
Budget Authority
Outlays

1/
Budget Authority
Outlays

4,984
4,519

1982
5,065
5,044

Budget Reform
Criterion: 2
($ in millions)
1984
1983

1985

1986

4.526
3,320

4,517
4,704

4,400
4,717

4,224
4,530

-26
1,325

-99
-258

-124
-447

-131
-408

-510
-521

-740
-669

-585
-628

-536
-556

-580
-528

-376
-410

4,474
3,998

4,325
4,375

3.915
4,017

3,882
3,890

3,696
3,742

3,717
3,712

this proposal. Total savings expected are as follows:
1981
1982
1983
1984
1985
-2,074
-510
-1,016
-1,659
-1,857
-2,019
-521
-803
-1,499
-1308

1986
-2,287
-2,233

Program Description
The two major student financial aid programs are Pell Grants (formerly called Basic Educational
Opportunity Grants, BEOGs), which provide awards to undergraduate students who can demonstrate
need, and Guaranteed Student Loans (GSL) which provide subsidized loans to any postsecondary
student, regardless of need.

Proposed Change
Under the Administration's proposal, benefits to the highest income students will be eliminated. In
the Pell Grant program this will be accomplished by increasing the amount of discretionary income
that families must contribute to the support of a student, except where there is extreme financial need.
In the GSL program student loan amounts will be limited to "remaining need" (educational costs
minus other aid and family contribution), ending the in-school interest subsidy on loans to students,
and eliminating the Federal special allowance to lenders on loans to parents.

Rationale
Without these reforms, the GSL program would be recklessly expanded in a few years. Under the
GSL program, students can borrow regardless of their educational need, with the Federal Government
paying all interest on the loan until the student is out of school. The result is that the Federal
Government pays high rates of interest, on free money that students spend as they see fit. While the
principal amount of the loan must eventually be repaid proceeds of these loans can be invested
allowing students and their families to earn 14-15% yields on money for which the Federal
Government is paying 14-15%. Without rational limitations, such as the Administration is proposing,
the Department of Education could soon become the creditor of the first resort for every American
family that has a family member enrolled in postsecondary education.

Key Facts About the Program
•

To ensure continued access to higher education by financially- needy students, funds are
requested to support the Pell Grant program ai a level based on a maximum grant of $1,800
in 1982-83. This will maintain assistance to low and moderate income students. The request
of $2,486,000,000 will provide grants averaging $920 to 2,700,000 students.

103

($ in thousands)
Program impact data
Recipients (in millions)
Average grant (in whole $)
Maximum grant (in whole $)

1980

1981

2.8
$862
$1,750

1982

2.8
$915
$1,75

2.7
$920
$1,800

The Pell Grant program targets funds to students from families with lower incomes. Until
the last few years, over 50 percent of the recipients were ftom families earning less than
$6,000. As incomes have risen, however, a larger segment of the population in the over
$12,000 income group has qualified and received awards.
($ in thousands)
1980

1981

1982

$2,415,328

$ 2,562,000

$2,486,000

$1,578,000

$ 2,159,000

$2,486,000

Program impact data
Estimated program costs
Sources of funding:
Appropriation/budget request
Reappropriation
Drawdown from next fiscal yr.
Supplemental appropriation
Total funds available

$579,328
$258,000

—

$
$

—

$2,415,328

258,000
661,000

$ 2,562,000

—
—

$2,486,000

The total cost of the Pell Grant program in 1982 is $76 million less than the requested 1981
level. This reduction is achieved through an increase in the assessment rate levied on family
income. In 1981, only 10.5 percent of a family's discretionary'income was expected as a
contribution to a student's educational cost in the calculation of a Pell award. In 1982, it is
proposed that families contribute 20 percent of their discretionary income for such purposes.
By the end of fiscal year 1982, with the Administration's proposed changes, the Guaranteed
Student Loan program will have supported about $31.4 billion in loans to student and parent
borrowers. Of this amount, about $10 billion will have been directly insured by the Federal
Government and over $21 billion will have been guaranteed by State and private nonprofit
agencies'and reinsured by the Federal Government

Loan volume guaranteed
(dollars in billions)
Recipients
(in millions)

1977

1978

1.5

2.0

3.0

4.8

21.3

1.0

1.1

1.5

2.3

14.8

104

1979

Cumulative
Total
1965-1980

1980

Vocational Education
Agency: Department of
Education

Functional
Code:

Funding
CARTER BUDGET:
Budget Authority
Outlays
REESTIMATES & ADJUSTMENTS:
Budget Authority
Outlays
PROGRAM CHANGES:
Budget Authority
Outlays
REAGAN BUDGET:
Budget Authority
Outlays

1981

1982

779
767

779
937

Budget Reform
Criterion: 6

503
($ in millions)
1984
1983

1985

1986

842
841

903
864

961
912

1,022
968

-63
-49

-124
-101

-182
-153

-243
-208

-195
-77

-156
-174

-156
-123

-156
-126

-156
-131

-156
-134

584
690

623
763

623
669

623
637

623
628

623
626

Program Description
The Vocational Education Act (VEA) provides funds to support secondary, postsecondary and adult
vocational programs. Most funds are distributed to States on a formula basis. States use funds to
support program maintenance, program improvements, consumer and homemaking programs, special
programs for the disadvantaged, planning activities and the work of the State Advisory Council.
Funds also support research, curriculum development and some demonstration projects at the national
level.

Proposed Change
For all activities funded under the Vocational Education Act, the Administration proposes:
•

a $195 million reduction (or 25%) in 1981.

•

a $156 million reduction (or 20%) in 1982.

For activities funded under the Vocational Education Act:
•

each will be equitably reduced.

•

no existing activity will be eliminated.

•

Federal expenditures in 1981 will fall by $11 to $34 per enrollee and in 1982, by $9 to $36
per enrollee.

Rationale
Continued high levels of funding for vocational education can no longer be justified on the grounds
that Federal funds either stimulate State and local resources to increase the availability of vocational
programs, or provide increased access to vocational training for special populations. In 1980, State
and local contributions to vocational education overmatched Federal funds by an average of 10 to 1.
In the most recent year for which participation data are available, only about 15% of all vocational
disadvantaged education enrollees were handicapped or of limited English speaking ability.

Key Facts About the Program
Program Enrollments:
•

About 56% of vocational education participants are in secondary school programs, 15% are in
postsecondary programs, and 29% are in adult programs.

•

Individual vocational program areas (e.g., agriculture, office occupations) tend to have
enrollments dominated by one sex.

•

Vocational programs are offered in about 28,000 secondary and postsecondary institutions.

105

•

Only 8% of the secondary vocational institutions are in cities of 500,000 or more; 22% are in
communities of 100,000 to 500,000; and 60% are in communities of less than 100,000.

Program Funding:
•

State and local funds account for $10 of every $11 spent on vocational education.

•

State and local expenditures for vocational education have risen almost 10 times faster than
Federal expenditures since 1972.

Program Effectiveness:
•

About 3 million persons complete vocational programs each year. Of those who enter the
labor force, most find work related to their training.

•

Research results, are inconclusive as to whether there are long-term or sustained benefits for
vocational program graduates.

106

Department of Energy

107

Alcohol Fuels/Biomass/Urban Waste
Agency: Department of
Energy

Budget Reform
Criterion: 7

Functional
Code: 276

Funding
CARTER BUDGET:
Budget Authority
Outlays
PROGRAM CHANGES
Budget Authority
Outlays
REAGAN BUDGET:
Budget Authority
Outlays

Agency: Department of
Agriculture

1982

0
107

0
28

0
13

0
15

-741
-103

0
-28

0
-13

0
-15

0
- 15

-741
4

0
0

Functional
Code: 271

Funding
CARTER BUDGET:
Budget Authority
Outlays
PROGRAM CHANGES
Budget Authority
Outlays
REAGAN BUDGET:
Budget Authority
Outlays

($ in millions)
1984
1983

1981

1982

525
56

104

-505
-46

-94

20
10

1985

1986

Budget Reform
Criterion: 4
($ in millions)
1984
1983

1985

1986

Program Description
This program provides financial incentives for alcohol fuels, biomass and energy from municipal waste
projects through feasibility studies, cooperative agreements, direct loans and loan guarantees. Budget
authority of $1.27 billion was appropriated in 1980 to cover both DOE and USDA programs on a
multi-year basis, with $745 million allocated to DOE and $525 million allocated to USDA.

Proposed Changes
Terminate the program.
USDA ($505 million).

Rescind $1246 million in budget authority used by DOE ($741 million) and

Rationale
These financial incentive programs would be terminated as a result of applying sound criteria to
economic subsidy programs. Additional direct government spending programs are not needed in light
of the other incentives for alcohol fuels, biomass and urban waste.
•

Gasohol (a mixture of 10% alcohol and 90% unleaded gasoline) currently receives a subsidy
as a result of being exempt from the 4 cent per gallon federal excise tax. This subsidy
amounts to $16.80 per barrel of alcohol and reduces the cost of gasohol to the point where it
is competitive with gasoline. In addition, approximately 30 states provide tax credits for
gasohol ranging from 2 to 10 cents per gallon. The federal excise tax exemption will result in
estimated tax expenditure of approximately $200 million for gasohol production in 1982, and
could total over $2 billion over the next five years.

•

Capital investment in alcohol fuels, biomass and urban waste projects are made even more
attractive because certain types of plant and equipment are eligible for an investment tax
credit of 20%. In 1982, these costs will result in tax expenditures of over $200 million.

In addition, the President's economic recovery program includes new initiatives which will provide
further incentives for alcohol fuels, biomass and municipal waste.

109

•

The removal of price control from domestic crude oil will restore market forces in the energy
field and make these alternative energy sources more competitive with petroleum.

•

The President's tax proposals, including the income tax reductions and the accelerated
depreciation proposal, when coupled with the Federal spending and credit reductions, will
result in a significant increase in the amount of capital formation in the private sector for all
types of investment projects. This should increase capital availability for alcohol fuels,
biomass and urban waste projects without the need for government intervention through loan
guarantees and other financial incentives. Also, unlike other forms of alternative fuels,
alcohol fuels, biomass and urban waste projects are a less risky investment because the
technology is proven and the economic feasibility can be estimated relatively accurately.

These incentives will ensure that alcohol fuels, biomass and energy from municipal waste will be able
to compete effectively with conventional energy alternatives without the need for additional
government sudsidies through loan guarantees, feasibility studies and cooperative agreements.

Key Facts About the Program
TAX EXPENDITURES FOR ALCOHOL FUELS, BIOMASS AND URBAN WASTE

Excise Tax exemption
Production Tax Credits
Investment Tax Credit
TOTAL

1981
121
13
158
292

1982
189
35
207
431

(S in millions)
1984
1983
299
478
54
68
354
225
628
900

1985
562
80
423
1065

1986
626
90
276
992

PLANNED ALCOHOL FUELS PRODUCTION
Results of National Alcohol Fuels Commission (NAFC) Survey
•

340 plants are planned, which would result in production of 4.5 billion gallons of ethanol per
year.

•

The Commission's forcast estimates 1983 capacity of 850 million gallons per year, slightly
lower than the 1982 goal of 920 million gallons in the Energy Security Act.

•

The 1985 forecast ranges from 1.4 to 2.1 billion gallons per year, depending on oil prices,
corn prices, capital availability and limits on construction and equipment capability.

110

Department of Energy Administration/Overhead
Agency: Department of
Energy

Functional
Code: 276

Funding
CARTER BUDGET:
Budget Authority
Outlays
REESTIMATES & ADJUSTMENTS:
Budget Authority
Outlays
PROGRAM CHANGES:
Budget Authority
Outlays
REAGAN BUDGET:
Budget Authority
Outlays

Budget Reform
Criterion: 7
(S in millions)
1984
1983

1981

1982

303
294

402
370

387
355

-20
-2

-129
-107

283
292

273
263

1985

1986

397
392

409
404

412
415

-118
-86

-127
-122

-139
-134

-142
-145

269
269

270
270

Program Description
Most funding for Departmental Administration (indicated in millions of dollars) is for overhead
functions (personnel, accounting, etc. totaling $326) but also included are department-wide
crosscutting activities such as policy analysis ($29); international affairs ($12); outreach (e.g.,
intergovernmental, consumer affairs) programs ($46); facilities planning and in-house energy
conservation ($90) and miscellaneous activities (e.g., inventory changes, reimbursements) including
revenues (-$100).

Proposed Changes
1982 funding would be decreased by a total of $129 million (32 percent). Specific decreases (in
millions) are: management and support (-$44); policy analysis
(-$11); international (-$7);
intergovernmental and consumer programs (-$14); facilities planning and in-house conservation (-$41)
and miscellaneous activities (-$12).

Rationale
Decreases reflect President Reagan's effort to impose fiscal restraint on programs of national interest
and, especially, to cut Government overhead costs.
•

Overhead function workload is keyed, with some time lag, to direct program workload in the
Department and may be reduced in accordance with direct program cuts.

•

There is now less need for policy, international and outreach activities since market forces
will be playing a larger role in resolving energy issues and guiding energy consumer and
producer decisions.

•

In-house conservation and miscellaneous activities are decreased to reflect only the highest
priority projects and activities.

Key Facts About the Program
GENERAL MANAGEMENT AND SUPPORT
Support sendees are reduced, and staff decreased by 490. full-time positions.
POLICY ANALYSIS
A decisive Reagan energy policy based upon a limited Government role permits a 40 percent
reduction in funding for energy policy studies.

Ill

INTERNATIONAL AFFAIRS
The energy planning program for other countries is eliminated since they can obtain consulting
expertise without U.S. Government assistance. Staff is substantially reduced to eliminate duplication
with State Department and CIA.
OUTREACH PROGRAMS
Public Affairs is limited to communicating broad, general DOE policy and program information to the
media and the public; more specialized education/information activities are reduced or eliminated.
Intergovernmental Affairs will focus solely on necessary coordination with other levels of government;
most direct financial aid to State and local groups is eliminated. Consumer Affairs is limited to
advising the Secretary on the impacts of DOE policies and programs on consumers and ensuring
public participation; special education and training programs are eliminated.

112

Energy Conservation Programs
Agency: Department of
Energy

Functional
Code: 272

Funding
CARTER BUDGET:
Budget Authority
Outlays
REESTIMATES & ADJUSTMENTS:
Budget Authority
Outlays
PROGRAM CHANGES 1 7 :
Budget Authority
Outlays
REAGAN BUDGET:
Budget Authority
Outlays
17

Budget Reform
Criterion: 4
(S in millions)
1984
1983

1981

1982

753
705

872
931

813
959

-207
-42

-677
-442

546
663

195
489

1985

1986

635
810

579
638

576
576

-631
-645

-461
-623

-408
-467

-407
-407

182
314

174
187

171
171

169
169

The Carter budget already included some savings for energy conservation reflected in a proposed 1981 rescission with outlay

impacts in 1981 through 1983. Total savings expected are as follows:
1981
1982
Budget Authority
-254
-677
Outlays
-60
-460

1983
-631
-657

1984
-461
-623

1985
-408
-467

1986
-407
-407

Program Description
The Department of Energy conducts energy conservation programs in three areas:
•

Technology development, including both near-term, product-specific, as well as long-term,
generic research and development.

•

Standards, technical assistance and information, including standards for buildings and
appliances, mandatory, utility-delivered residential/commercial conservation services, and the
Federal Government's own energy management efforts.

•

Financial assistance, including grants for low-income weatherization, for schools and
hospitals conservation measures and for state energy conservation and emergency planning
and management.

Proposed Change
For technology development, support only long-term, generic and high risk, but potentially
high-payoff, research. Withdraw support from projects where commercial viability can be tested by
the private sector alone, including energy from urban waste, consumer products, advanced automotive
engine design, demonstration of electric and hydbrid vehicles, and industrial processes.
For standards, technical assistance and information, eliminate funding for development and
implementation of building and appliance standards and for the residential/commercial conservation
services program. Reduce funding for various technical assistance, public service information and
Federal energy management programs also.
For financial assistance, eliminate grants for State energy conservation and energy emergency planning
and management, but retain grants for schools and hospitals conservation measures. Eliminate funding
for DOE's low-income home weatherization assistance program and fold it into the community
development support assistance program in the Department of Housing and Urban Development
No change is proposed for the energy conservation tax credit, which is expected to provide at least
$739 million in support of private sector conservation during 1981 and $799 million during 1982.
Reductions in Department of Energy conservation activities thus represent a decrease of less than 26
percent in total Federal support for energy conservation in 1982.

113

Rationale
This proposal is part of the Administration's effort to apply sound economic criteria to subsidy
programs. Motivated by rising energy costs and substantial Federal tax credits, individuals, businesses
and other institutions are undertaking major conservation efforts. Decontrol of oil prices and
continuation of tax credits can be expected to accelerate these efforts. Some Federal conservation
programs, therefore, are no longer necessary, while others may impede private initiative by imposing
too great a regulatory burden on the public. More specifically:
•
Technology development reductions are appropriate because rising energy prices will increase
demand for energy-efficient products and thus stimulate private sector development of
near-term, product-specific technologies.
•

Standards, technical assistance and information reductions are warranted because, with rising
energy prices, -consumers are demanding and manufacturers are producing more
energy-efficient products and buildings without mandatory Federal standards. These trends
also obviate the need for much Federally supported technical assistance and public service
information. Similarly, where conservation is an economic alternative to new generating
capacity, utilities are developing their own conservation programs.

•

Reductions in financial assistance are called for because State energy conservation planning
and management grants do not merit Federal support, given the widespread public awareness
of energy conservation benefits and the high level of private investment in energy
conservation.
The schools and hospitals grant program, however, yields measurable benefits that would not
otherwise occur, because of the difficulty localities have in obtaining front-end financing for
new public facilities. Further, these grants have proved their value in financing cost-effective
conservation improvements in public facilities not eligible for tax incentives.
Combining the Department of Energy weatherization program with the Housing and Urban
Development Department's community development block grant is an example of
Administration efforts to shift resources and decisionmaking authority to State and local
governments through block grants and program simplification wherever possible. By shifting
responsibility for weatherization efforts entirely to the local level, communities will be able to
devise approaches most appropriate to their needs and circumstances and achieve greater
levels of efficiency and productivity.

Key Facts About the Program
Evidence is ample that increasing energy prices already are inducing substantial energy conservation:
•
In the six years after the Arab oil embargo, total U.S. energy consumption increased only six
percent, compared with an increase of 29 percent in the six years prior to the embargo.
•
While fossil fuels prices in constant dollars have doubled since 1973, energy consumption per
GNP dollar (the best indicator of the Nation's overall energy efficiency) has declined every
year since that time, decreasing by a total of nine percent.
•
Annual growth in energy demand declined from over five percent in 1976 to less than one
percent in 1979 and to minus four percent in 1980.
Fuel use for home space heating declined at least 15 percent between 1979 and 1980.
•
•
Industrial energy use is almost the same as it was in 1972 despite a 20 percent increase in
real industry output.
•
Average miles per gallon of fuel consumed by U.S. passenger cars rose from 13.1 mpg in
1973 to 14.29 mpg in 1979.
•
•

Average annual fuel consumption per car declined 12.9 percent from 1973 to 1979.
An April 1980 national survey by Pat Caddell found that nearly 90 percent of the
respondents were concerned about the rising costs of gasoline; nearly 80 percent had received
information in the past month from newspapers, television and radio on improving their
gasoline mileage; and over 70 percent reported reducing gasoline use.

•

The private, nonprofit Advertising Council has sponsored five national energy conservation
campaigns since 1975. All advertising agency staff time and media coverage (TV, radio,
newspapers and magazines) was donated free, of charge. The Council estimates the minimum
value of media coverage contributed between 1975 and 1979 at nearly $200 million.

114

Energy Information Activities
Agency: Department of
Energy

Functional
Code: 276

Funding
CARTER BUDGET:
Budget Authority
Outlays
REESTLMATES & ADJUSTMENTS:
Budget Authority
Outlays
PROGRAM CHANGES:
Budget Authority
Outlays
REAGAN BUDGET:
Budget Authority
Outlays

Budget Reform
Criterion: 6
($ in millions)
1984
1983

1981

1982

105
102

127
127

135
135

-14
-12

-47
-49

91
90

80
78

1985

1986

144
144

153
153

161
161

-61
-61

-67
-67

-73
-73

-78
-78

74
74

77
77

80
80

83
83

Program Description
The Energy Information Administration (EIA) collects and publishes energy statistics; prepares
forecasts and analyses; and provides data collection services for other components of the Department
of Energy. The budget for EIA has grown significandy from less than $50 million in 1977 to the
Carter proposal of $127 million in 1982. The result has been new or more detailed data systems and
refined analyses of limited value which have created a growing demand for energy consultants and
statisticians. Also, extensive and costly reporting burdens have been imposed on the private sector.

Proposed Change
The Reagan budget reduces Carter EIA funding by 37 percent in 1982 and by even larger amounts in
the outyears, approaching 50 percent by 1986. This will reverse the trend toward ever more detailed
statistics and assessments. EIA will focus on basic oil, gas, coal, and electric utility data systems, with
improvements in these systems as warranted, and on publications of proven value, such as the
Monthly Energy Review. Emphasis will be on national level data; State level data, costly to collect,
will be cut back. Recently created systems that have produced information readily available elsewhere
will be significantly reduced or eliminated. Analytical efforts will be reoriented to provide faster,
more relevant analysis and eliminate duplication with other Department of Energy offices. Reduced
activity of other Energy Department units will also reduce the need for EIA support.'

Rationale
In times such as these, requiring fiscal austerity, the benefits of ever more data and statistical precision
fall short of the costs, which include significant costs inflicted on the private sector in burdensome
reporting requirements. Therefore, EIA will go back to basics and not try to satisfy each and every
demand for energy data and analysis. There will be less need for such services as energy consumers'
and producers ' decisions are guided more by the free play of market prices than by Federal planning
and regulation.

Key Facts About the Program
EXAMPLES OF ACTIVITIES ELIMINATED:
•

Collection and publication each month of State, by State consumption data for six fuel types.
This imposes a significant burden on the private sector and Government. EIA can focus on
national level data, with little loss to decision making necessary for national energy policy.

•

Collection of financial data from oil companies which in part is already reported to the
Securities and Exchange Commission and is available in company financial reports.
Department of Energy reports indicate there are no "scandals" to uncover with this
information. Continued collection of these data is a luxury incompatible with the need to
reduce the budget.

115

EXAMPLES OF ACTIVITIES CUT BACK OR REORIENTED:
•

Forecasting of petroleum prices to the year 2000. The limits of analysis are such that we
cannot predict oil prices even for next year with a high degree of confidence.

•

General energy modeling, used as a framework within which to address broad issues. Such
modeling will be simplified and more focused on specific public policy needs. At present
this activity suffers from too much operations research input and too little economic input.

WHAT REMAINS?
•

For its three principal program responsibilities—collection, analysis, and data services—EIA
will focus more on basic data series and systems for oil, gas, coal, and utilities and focus less
on discretionary data and systems that try to satisfy every conceivable "need." Validation
(quality assurance) efforts will continue within these programs. In addition to the savings of
$47 million in 1982, all these changes will eliminate a need for some 390 Federal employees.

116

Energy Regulation
iVgency: Department of
Energy

Functional
Code:

Funding
CARTER BUDGET:
Budget Authority
Outlays
REESTIMATES & ADJUSTMENTS:
Budget Authority
Outlays
PROGRAM CHANGES:
Budget Authority
Outlays
REAGAN BUDGET:
Budget Authority
Outlays

Budget Reform
Criterion: 6

271
($ in millions)
1984
1983

1985

1986

238
240

238
234

230
230

-143
-145

-136
-138

-133
-129

-123
-123

105
104

102
102

105
105

107
107

1981

1982

331
291

270
300

248
249

-111
-68

-159
-179

220
223

111
121

Program Description
The Carter budget assumed decontrol of crude oil and remaining petroleum products (gasoline,
propane) would not take place until September 30, 1981. A wide range of other energy regulations
were to continue without major change. This included programs of the Economic Regulatory
Administration, the Office of Hearings and Appeals, the Federal Energy Regulatory Commission, and
gasoline rationing preimplementation.

Proposed Change
President Reagan's commitment to ending unnecessary Government regulation will permit a sizable
reduction in spending and removal of large numbers of Federal employees from Government payrolls.
Department of Energy activities such as the oil price and allocation regulatory functions of the
Economic Regulatory Administration, interventions in State public utility proceedings, mandatory
fuel-use restrictions, and the cumbersome coupon rationing system will be eliminated. The proposed
reductions total $159 million, or a reduction of 59 percent from 1982 budget authority levels.

Rationale
These changes are part of the President's policy to impose fiscal constraint on programs of national
interest. The economic impact of energy regulations is enormous. For more than nine years,
restrictive price controls held U.S. oil production below its potential and artificially boosted energy
consumption. These price controls and the related entitlements program subsidized importation of
foreign oil, made us more dependent on OPEC, and aggravated our balance of payments problems.
Removal of these controls is a positive step toward allowing our free market to promote prudent
conservation and vigorous domestic production. Oil decontrol has also enabled the President to
propose elimination of the Department of Energy regulatory activities that were designed to
compensate for marketplace imbalances caused by price controls on oil — e.g., energy use restrictions
as in the Powerplant and Industrial Fuel Use Act.

Key Facts About the Program
Sizable direct savings of $51 million in 1982 budget authority result from oil decontrol since this
eliminates administration of complex regulations, reduces compliance work, reduces the hearings and
appeals, and reduces program overhead. For example, the Office of -Hearings and Appeals has
quickly resolved almost two-thirds of the cases pending 'at the time of the decontrol action.
Indirect savings totaling $104 million in 1982 budget authority also result from oil decontrol. Other
regulatory activities designed to compensate for the market distortions caused by oil price controls can
be eliminated, including:
•

Repeal of the coal conversion program under the Fuel Use Act requiring utilities and others
to switch away from oil. Reliance should be on market forces. Only three powerplant units
have converted to coal under the program in two years, and they did so voluntarily.
(Savings of $31 million.)
117

•

Termination of assistance for, and Federal interventions in, Stale utility rate proceedings.
These Federal activities aided State utility commissions in complying with the Public Utility
Regulatory Policies Act of 1978. This need will have been met by the end of 1981. (Savings
of $21 million.)

•

Termination of planning for government petroleum allocation during supply disruptions (as
under the Emergency Petroleum Allocation Act) and reliance on market forces. Federal
allocation programs have been unsuccessful. Rigidities in the past allocation system gave rise
to petroleum shortages in recent years. (Savings of $17 million.)

•

Termination of activities to implement gasoline rationing,, authorized by the Energy Policy
and Conservation Act, as amended by the Emergency Energy Conservation Act. Rationing
would fail because of its complexity, vulnerability to fraud, and extraordinary regulatory
burden. The Department of Energy will pursue alternative strategies relying on market
forces. (Savings of $35 million.)

Two other changes saving a total of $4 million in 1982 budget authority are proposed to curtail the
Federal Energy Regulatory Commission hydropower program authorized by the Federal Power Act:
•

The first would raise the threshold for hydropower projects that are partially exempt from
Commission jurisdiction. As a result, small projects could be placed in operation in much
less time.

•

The second would eliminate the hydropower resources analysis program that develops river
basin use plans. This would provide less Federal interference for planners at the local,
regional and State levels.
In addition to the dollars saved, the reductions will eliminate the need for almost 1500 Federal
employees from current on-board levels.

118

Energy Sciences
iVgency: Department of
Energy

Functional
Code: 271

Funding
CARTER BUDGET:
Budget Authority
Outlays
REESTIMATES & ADJUSTMENTS:
Budget Authority
Outlays
PROGRAM CHANGES
Budget Authority
Outlays
REAGAN BUDGET:
Budget Authority
Outlays

Budget Reform
Criterion: 6
($ in millions)
1984
1983

1981

1982

263
263

346
346

373
373

-2
-1

-54
- 54

261
262

292
292

1985

1986

396
396

417
417

437
437

-60
-60

-64
-64

-68
-68

-71
- 71

313
313

332
332

349
349

366
366

Program Description
This DOE program supports basic research in such areas as coal chemistry, materials effects, corrosion, combustion,
catalysis, etc. necessary to the effective long-term advancement of new energy technologies. It also includes special
programs in University Research and Advanced Technical Assessments.

Proposed Change
Reductions will generally be taken across the board. Core areas of expertise in all fields will be
maintained. The integrity and general thrust of the program is preserved.

Rationale
Although these programs are in the national interest and appropriate for federal support, the level of
increase proposed in the Carter budget cannot be sustained in a period of fiscal constraint.

Key Facts About the Program
•

The Administration remains committed to a strong Federal role in long term energy research
which the private sector is not able to support sufficiently in the national interest.

•

These programs support long-term research which will lead to future improvements in the
energy production technologies.

•

These activities are conducted as a large number of small research programs conducted,
primarily at universities across the country.

•

The Basic Energy Science program operates and supports unique materials research facilities
with considerable corporate participation and funding.

119

Fossil Energy
Agency: Department of
Energy

Functional
Code: 271

Funding
CARTER BUDGET:
Budget
Authorit^
Outlays
REESTIMATES & ADJUSTMENTS:
Budget Authority
Outlays!/
PROGRAM CHANGES
Budget Authority
Outlays
REAGAN BUDGET:
Budget Authority
Outlays
17

Budget Reform
Criterion: 4

1981

1982

(S in millions)
1984
1983

929
942

1008
1048

1253
1218

1230
1198

1344
1319

1376
1369

-70
-40

-359
-332

-500
-381

-560
-501

-613
-594

-861
-516

859
902

648
716

753
837

670
697

731
725

861
853

1985

1986

Includes Fossil R&D and non-solar parts of Energy Production, Demonstration and Distribution account including the Naval Petroleum

Reserve.

Program Description
DOE currently supports a wide range of activities aimed at developing and improving technologies for
producing and using coal, oil shale and oil and gas and for assisting the adoption of these technologies
by private industry. These activities also include funding for the operation of major fossil energy
demonstration projects and pilot plants.

Proposed Change
Focus support for fossil energy demonstration projects in the Synthetic Fuels Corporation and
terminate on-budget support in the DOE; phase out support for two major coal liquefaction pilot
plants; and refocus remaining R&D activities on long-term high risk R&D with potentially high
payoffs. Also terminate all commercialization activities.

Rationale
Costly near-term activities, such as construction and operation of pilot plants and the operation of
demonstration plants using company-specific processes, subsidize individual companies while
producing rapid and uncontrollable growth in the Federal budget.
The budget in this area has increased dramatically in the last seven years, increasing over seven-fold
primarily because of pressures from private firms to have Federal funding spread among many
potential private competitors.
These Government outlays are less needed now because the energy industry has stepped up its
research and development investments, having increased its 1979 spending 25% over the previous
year's level. Deregulation of energy prices will provide additional incentive to continue this trend,
while other Administration policies such as the proposed tax incentive for investment through
accelerated capital recovery and removal of excessive regulatory burdens will further enhance the
private sector's ability to develop and introduce new technologies.
By relying on private market forces and the assistance of the newly created Synthetic Fuels
Corporation, near-term technology development and commercialization activities can proceed without
direct Federal funding. Federal research support can be focused on relatively less costly high-risk,
longer-term, high-payoff activities that the private sector traditionally has been less willing or able to
undertake.

120

Key Facts About the Program
•

In the enhanced gas recovery area the Administration's FY 1982 budget calls for an $18
million reduction under Carter level to $10.7 million in budget authority. About 25 percent
of this is due to cutoff of DOE geologic assessment activity which is being done by the
private sector. In addition, with price increases under the Natural Gas Policy Act, drilling has
increased from 11,378 wells in 1978 to almost 15,000 last year according to some estimates.
Largest drilling increases were in the higher cost gas categories (deep and unconventional
gas) and preliminary estimates suggest new gas discoveries in 1980 will exceed withdrawals.

•

In oil shale a reduction of $11 million in budget authority is proposed under Carter budget.
Price decontrol, the existence of the Synthetic Fuels Corporation and recent OPEC increases
have spurred a new wave of private sector investment in commercial oil shale production.
Seventeen of the top 20 oil companies are now involved in oil shale projects. These
companies have financial and technical resources to commercialize technology. They do not
need direct government R&D subsidies to assist their activities.

•

A $174 million reduction in budget authority is proposed for coal gasification and
liquefaction operating costs. Most of this reduction can occur because of termination of
major fossil demos in FY 1982. In addition, the budget proposes to phase out Federal
support for the Exxon Donor Solvent (EDS) and H-coal coal liquefaction pilot plants. The
Federal government has subsidized the construction of these facilities. The companies
involved have both the financial and technical resources to continue to operate these facilities
if they believe it is beneficial.

•

The budget proposes to phase out all magnetohydrodynamics (MHD) activity in FY 1982.
MHD is a technology that, although it is long term and high risk, does not have a high
payoff relative to other competing electricity technologies. Other technologies, such as fuel
cells, promise efficiency nearly as high as MHD, yet they are much closer to market
introduction.

121

General Science Program
iVgency: Department of
Energy

Functional
Code: 271

Funding
CARTER BUDGET:
Budget Authority
Outlays
REESTEV1ATES & ADJUSTMENTS:
Budget Authority
Outlays
PROGRAM CHANGES
Budget Authority
Outlays
REAGAN BUDGET:
Budget Authority
Outlays

Budget Reform
Criterion: 6
(S in millions)
1983
1984

1981

1982

504
510

607
597

653
651

-40
- 24
567
573

—
—

504
510

1985

1986

708
708

759
755

801
801

-44
-43

-60
-60

-76
-72

-83
- 83

608
608

647
647

683
683

717
717

Program Description
The DOE supports basic research in high energy physics, nuclear physics, and nuclear life sciences at
National Laboratories (inherited from AEC) and in universities. This research is analogous to the
type of basic research supported by the NSF in all disciplines of science.

Proposed Change
The Administration proposes a reduction of $40 million in the Department of Energy's general science
programs in life sciences and nuclear medicine, high energy physics, and nuclear physics. These cuts
are both across-the-board reductions in activity spread across the community and stretchouts or
deferrals of existing or newly initiated construction projects.

Rationale
Although these basic research programs represent an appropriate Federal commitment and are in the
national interest, the level of increase proposed by the Carter Budget was too large to be sustained in
a period of fiscal austerity.

Key Facts About the Program
•

As evidenced by the 12% increase over 1981 the Administration supports a Federal,role in
long term research in frontier areas such as high energy physics and nuclear physics. Such
fundamental programs not only provide clearer understanding of the basic constituents of
matter but can also lead to technological spin offs.

•

This increase will cover anticipated inflation in recognition of the importance of basic
research in these and other fields of the natural sciences as an investment in the Nation's
future.

•

The proposed 12% increase over 1981 will compensate for anticipated cost increases due to
inflation.

•

The 1982 request will permit continuation of existing construction projects for high energy
physics with perhaps some stretch in schedule. The level of experimentation, despite rising
dollar levels, will remain esentially constant

•

The construction schedule on the ISABELLE facility (Intersecting Storage Ring Accelerator)
at the Brookhaven National Laboratory will probably be stretched. This is dictated by
technical problems associated with magnet design as much as by budget constraints. It is still
too early to determine whether a change in project scope or total estimated cost is warranted.

122

Magnetic Fusion
iVgency: Department of
Energy

Functional
Code: 271

Funding
CARTER BUDGET:
Budget Authority
Outlays
REESTIMATES & ADJUSTMENTS:
Budget Authority
Outlays
PROGRAM CHANGES
Budget Authority
Outlays
REAGAN BUDGET:
Budget Authority
Outlays

Budget Reform
Criterion: 6
(S in millions)
1984
1983

1981

1982

394
443

506
563

580
575

-11
-8

-46
- 84

383
435

460
479

1985

1986

680
630

770
690

835
750

-86
-65

-155
-105

-216
-136

-253
- 168

494
510

525
525

554
554

582
582

Program Description
The DOE magnetic fusion program consists of basic plasma physics and engineering development
which are being integrated into a technology feasibility program to demonstrate energy production
from fusion.

Proposed Change
This proposed reduction will cancel the Fusion Materials Irradiation Test Facility (FMIT), a materials
support device at Hanford, Washington, and will also cancel the ISX long pulse experiment at Oak
Ridge. The schedule on construction of the Fusion Engineering Device (FED) has also been slowed.
The Center for Fusion Engineering and the commitment to an FED remain as part of the FY 1982
budget

Rationale
The magnetic fusion reduction from the Carter Budget was taken in 1982 as part of a general
reduction in Federal expenditures even in programs of national interest. The cancellation or
slowdown of facility construction (FMIT, ISX, FED) should not significantly effect nor unduly delay
development of the magnetic fusion program.

Key Facts About the Program
•

These 1982 reductions from the Carter Budget do not represent any basic change in the
Administration's strong commitment to the development of this inexhaustible energy supply
option.

•

The revised 1982 request still shows a 5% increase over the 1981 level of effort.

•

Thirty million net out of the $46 million decrease is due to the cancellation of the Fusion
Materials Irradiation Test Facility (FMIT) that was to be built at Hanford, Washington.
DOE is now studying less expensive ways to conduct materials research for the fusion
program.

•

The present program continues to maintain a broad science and technology base. This will
enable DOE to exploit any successes in new fusion concept experiments. Experiments such
as EBT at Oak Ridge, Spheromak at Princeton -and OHTE at General Atomics are important
insurance that the best ftision concept will emerge as an eventual reactor candidate.

•

The cancellation of the ISX experiment (another $8 million) for long pulse operations to be
conducted at Oak Ridge represents a legitimate technical judgment by the DOE. More cost
effective alternatives exist to provide the same scientific data.

123

•

The Fusion Engineering Device (FED) has been slowed by approximately one year. The
additional time should permit a better definition of the goals, concept and design of this
facility.

•

Some have suggested that fusion should be slowed down in the interest of developing the
breeder.
This is not the Administration policy.
These are complimentary nuclear
technologies with different development and deployment schedules. They both represent
reasonable energy supply options and will receive appropriate levels of support in the future.

124

Other Energy Supply
iVgency: Department of
Energy

Functional
Code: 271

Funding
CARTER BUDGET:
Budget Authority
Outlays
REESTIMATES & ADJUSTMENTS:
Budget Authority
Outlays
PROGRAM CHANGES
Budget Authority
Outlays
REAGAN BUDGET:
Budget Authority
Outlays

Budget Reform
Criterion:
6
(S in millions)
1984
1983

1981

1982

688
657

602
636

639
623

-147
- 70

-223
-195

541
587

379
441

1985

1986

683
647

716
685

734
728

-212
-215

-209
-205

-196
-197

-195
- 204

427
408

474
442

520
488

539
524

Program Description
These programs include geothermal, small hydropower, electric energy systems, energy storage,
environment, uranium resource assessment, energy impact assistance and general plant projects.

Proposed Change:
By applying sound criteria to these programs, primarily involving economic subsidy, it is proposed
principally to terminate near-term demonstration, commercialization and subsidy activities which
should be a private-sector responsibility and which, in many cases, the private sector is already
supporting.

Rationale
The specific reductions in the area of technology development and their rationale are to:
•

terminate geothermal loan guarantees that serve merely to reallocate capital from more
productive investments;

•

eliminate funding for additional Government-supported commercialization of geothermal
technologies that can and should be supported by die private sector;

•

eliminate development and demonstration programs in electric energy systems and energy
storage that can and should be supported by the private sector;

•

terminate subsidies for additional small hydropower demonstrations, because sufficient
incentives already are provided through a 21% investment tax credit and through credit
programs in the Department of Agriculture.

In addition to the above reductions in technology support programs, other actions are proposed to:
•

eliminate energy impact assistance grants to the States that unnecessarily assume
responsibility for activities that are more appropriately undertaken by .State and local
governments with industry support and duplicate other sources of Federal assistance.

•

terminate environmental studies that are ineffective and
Environmental Protection Agency and other Federal agencies;

•

phase out uranium resource assessment activities because this program is no longer necessary
to meet nuclear nonprolioferation objectives and because adequate data on uranium
resources is already available;

•

stretch-out lower-priority construction projects at Department of Energy multi-purpose
laboratory facilities during this period of needed restraint.

125

duplicate

efforts at

the

Key Facts About the Program
1981

Hydropower
Electric Energy Systems
Energy Storage
Geothermal
Environment
Uranium Resource Assessment
(.NURE)
Energy Impact Assistance
General Plant Facilities
Total

Carter
BA
BO

Reagan
BA
BO

1982
Carter
Reagan
BA
BA
BO
BO

22
40
72
199
237

23
42
74
160
230

-3
35
52.
164
227

20
38
52
157
225

3
39
60
97
280

16
38
64
123
275

0
10
39
49
231

10
9
44
84
234

31
62
25
688

47
63
18
657

31
10
25
541

47
30
18
587

25
48
50
602

25
65
30
636

10
0
40
379

19
16
25
441

HYDROPOWER:
The private sector is now actively pursuing small hydro development. No further DOE spending is
needed.
•

Applications for FERC preliminary permits increased almost 15 times between 1978 and
1980, to a total of 500 applications.

•

In fiscal year 1981, over 572 applications were received in the first four months alone.

•

A lot of this activity is being spurred by the 21% investment tax credit

•

For small, publicly-owned facilities, credit assistance is still available through USDA.

ELECTRIC ENERGY SYSTEMS AND ENERGY STORAGE:
Near term development and demonstration activities — which the private sector is or can be
expected to supported — are being phased out. For example, the revised budget terminates:
•

development of new and improved chemical batteries for electric vehicle use;

•

demonstrations of the use of battery storage to reduce utility peak power demands.

GEOTHERMAL:
The revised budget terminates funding for near term geothermal activity. For example:
•

Near term hydrothermal development such as programs in site confirmation, cost sharing
commercialization efforts with the States and technical assistance to industry.

•

The demonstration of the binary cycle at Heber, California.

•

Operation of the 5MW.binary pilot project at Raft River in Idaho.

•

The Geothermal Resource Development Fund. Additional guarantees for loans will cease
which will allow the banks to assess the value of investments in this technology.

The program for geopressured resource and component development is being reduced to eliminate
duplication with industry efforts.
ENVIRONMENT:
The proposed reduction will terminate duplicative and unnecessary activities while ensuring that
critical environmental research and assessment activities continue. For example:
•

Short-term, site-specific research activities will be eliminated because they should be a
private sector responsibility. Longer-term generic work will be unaffected.

•

Duplicative and ineffective environmental assessments, such as the DOE-funded
water-for-energy studies performed by the Water Resources Council, will be terminated.
These studies duplicate similar activities required under NEPA.

126

•

Environmental control technology evaluations, which are unnecessary to formulate
energy-related environmental policy judgements, will be terminated, along with other
evaluations at specific demonstration sites which no longer will be DOE-supported.

URANIUM RESOURCE ASSESSMENTS (NURE):
The uranium resource assessment program has essentially completed its original goal to provide a
comprehensive assessment of national uranium resources.
•

Essential geologic and geophysical data on 144 high priority quadrangles covering most of
the known uranium-producing and high potential areas has been developed.

•

Projections of future uranium supply and costs indicate adequate supplies into the next
century.

•

One of the justifications for the program was to prove enough uranium existed to put off a
decision on building the breeder reactor. The Reagan Administration's policy is to proceed
with the breeder; therefore this justification for the program no longer exists.

ENERGY IMPACT ASSISTANCE:
This program is being proposed for termination because energy development activities partially
generate sufficient State and local revenues to mitigate the adverse impacts of development without
Federal assistance. Additionally, a 1978 report to the President identified more than 115 Federal
programs which could be used to assist communities impacted by energy development projects.
A 1980 report by the Congressional Budget Office also identified numerous Federal and State funding
sources for impact assistance, including:
•

the share of Federal mineral lease royalties which are returned to States (50% of royalties
from coal; 37.5% for other minerals) which total nearly $350 million for FY 1981;

•

loans against future mineral lease revenues, which are authorized by P.L. 94-579 to provide
"front-end" funding needed by communities;

•

Federal payments in lieu of taxes, which are scheduled to provide $111 million in FY 1981;

•

the reclamation fund established by the Surface Mining Control and Reclamation Act (P.L.
95-87), funded from a tax on each ton of coal mined, which can be used for impact
assistance.

•

State mineral severance taxes, which have grown from $686 million in 1970 to $2.5 billion in
1978.

127

Solar Energy Development
iVgency: Department of
Energy

Functional
Code: 271

Funding
CARTER BUDGET:
Budget Authority
Outlays
REESTIMATES & ADJUSTMENTS:
Budget Authority
Outlays
PROGRAM CHANGES
Budget Authority
Outlays
REAGAN BUDGET:
Budget Authority
Outlays

Budget Reform
Criterion: 4
(S in millions)
1983
1984

1981

1982

577
589

583
589

664
650

-99
-79

-390
- 380

478
510

193
209

1985

1986

623
657

595
595

553
553

-457
-443

-403
-437

-362
-362

-309
- 309

207
207

220
220

233
233

244
244

Program Description
The DOE solar program currently includes research and development on a variety of emerging solar
technologies (e.g. photovoltaics) and market development efforts to promote the use of solar
technologies ready for commercialization (e.g., active solar heating). The current program also
includes funds for a permanent facility for the Solar Energy Research Institute (SERI).

Proposed Change
The DOE solar program is being reduced by 67% in budget authority frorp the Carter budget for FY
1982, with cumulative savings of more than $2 billion by the end of 1986. Reductions are proposed
in all solar technologies to eliminate nearer-term technology development and commercialization
activities. Long-term high risk, but potentially high payoff, research will continue. Funds for a
permanent facility for SERI are deleted.

Rationale
These changes are proposed to apply sound economic criteria to replace current subsidy programs.
The DOE reductions are part of a new Federal solar strategy that places greater emphasis on the
private sector and market forces for the near-term development and commercialization of solar
energy. Deregulation of oil and the increasing natural gas prices permitted under the Natural Gas
Policy Act will remove the subsidies for competing oil and gas technologies that have prevented solar
from achieving its true potential. Under these favorable conditions for solar energy, and assisted by
continued solar tax credits, it is no longer necessary or appropriate for DOE to support costly
near-term development, demonstration and commercialization efforts that industry can and will do.
These changes will have little effect on solar energy use, which will continue a healthy rate of increase
over time as rising conventional energy prices and the tax incentives stimulate the demand for
commercial solar products.
Funds for construction of a permanent facility for the Solar Energy Research Institute are deleted.
The mission of this organization needs to be better defined and an appropriate staffing level agreed
upon before any decision is made to proceed.

Key Facts About the Program
TOTAL FEDERAL SOLAR SUPPORT:
The following table compares the Carter and Reagan levels of total Federal support for solar energy.
It should be noted that total Federal support for solar energy will remain high under the President's
proposal due to continuation of solar tax credits, which are expected to reduce taxes for residential
and business investors in solar energy system by $2.6 billion between 1981 and 1986.

128

Budget Authority
($ in Millions)
Changes
Changes

Carter
1981

DOE Solar Program
Other Federal Programs
Solar Tax Credits
(excluding alcohol fuels
and biomass)
Total

1982

1981

1982

577
239

583
388

-99
-47

128
944

216
1187

^
-146

Reagan
1981

1982

-390
-92

478
192

193
296

n
-482

128
798

1
705

SOLAR TAX CREDITS
Federal solar tax credits consist of:
•

a 40% residential credit available to homeowners on the first $10,000 of their solar
investment.

•

a 15% residential credit for landlords.

•

a 15% business investment credit.

•

tax exemption for industrial development bonds (IDB's) for State renewable resource
programs.
These credits provide significant tax reductions for solar energy users:
1981

1982

FISCAL YEAR
1983
1984

1985

1986

112
276
360
515
191
646
Residential (including landlords)
24
55
100
141
15
160
Business Investment Credit
1
1
3
6
7
IDB's for State renewable programs
_2
334
682
128
216
466
TOTAL
796
Extensive Federal tax incentives for alcohol fuels and biomass energy are also available. These are
covered in separate justification papers. States also provide tax breaks for solar energy systems.
SOLAR INDUSTRY GROWTH:
Stimulated by rising conventional energy prices and solar tax credits, the market for solar energy
products is expanding rapidly.
•

Active Solar: The number of solar collector manufacturers has grown from 45 in 1974 to
223 in 1980—nearly a five-fold increase.

•

Photovoltaics: It is estimated that actual and planned investments by the private sector in
photovoltaics have totaled nearly $300 million to date.

•

Biomass: Direct combustion of wood already provides 2% (1.5 Quads) of our national
energy consumption; and annual sales of wood stoves have increased from 160,000 in 1972 to
over 1,000,000 today.

•

Wind: In the mid-1970's there were about seven importers or manufacturers of small wind
systems and little private funding of larger systems. Today, there are approximately 37 U.S.
manufacturers of small wind systems and at least five privately supported developers of
intermediate and large scale systems.

EXAMPLES OF ACTIVITIES ELIMINATED OR SIGNIFICANTLY REDUCED:
•

Wind: Design and fabrication of additional intermediate and large scale wind machines.
With private sales already occurring and companies developing these machines without
Federal support, no further Federal funding for this activity is warranted.

•

Photovoltaics: Low Cost Solar Array project, which funds quality improvements and cost
reductions in near-term photovoltaic production processes. This activity will be undertaken
by the private sector, which has made significant investments in this technology.

344-211

129
0-81-5

•

Active Solar: Near term technology development and market support for solar hot water
and space heating systems. With more than 300,000 systems already in place, and annual
sales of $750 million, product improvements and marketing of these systems can be left to
industry.

EXAMPLES OF ACTIVITIES CONTINUED:
Longer term, high risk, but potentially high pay-off, research such as:
•

Photovoltaics:
devices.

•

Biomass: Identification and exploratory development of potential biomass energy feedstocks
that have not been investigated extensively (e.g., cultivation of microalgae).

•

Solar Thermal: New materials development and concept definition of advanced solar
thermal systems for electricity generation and industrial process heat.

Advanced research and development on amorphous silicon material and

130

Synthetic Fuels
Agency: Department of
Energy

Functional
Code: 271

Budget Reform
Criterion:
6

Funding
CARTER BUDGET: 17
Budget Authority
Outlays
REESTIMATES & ADJUSTMENTS:
Budget Authority
Outlays
PROGRAM CHANGES27
Budget Authority
Outlays
REAGAN BUDGET:
Budget Authority
Outlays
1/

2/
3/

1981

1982

($ in millions)
1984
1983

1985

1986

415
275

858
864

1064
859

362
676

140
224

25
256

-545
-275

-858 37
-864

-1060
-859

-362
-676

-140
-224

-25
-256

0
0

-130
-60

0
0

Does not include non-svnfuel part of Fossil Energy Construction Budget
Reduction includes rescission of $300 BA for feasibility studies and cooperative agreements..
Does not reflect future FY 82 rescission of S170M of FY 81 funds for SRC II.

Program Description
Federal support for synthetic fuels is currently located in the DOE's Fossil Energy construction
budget, in the DOE's interim Alternative Fuels program and in the Synthetic Fuels Corporation
(SFC).
•

DOE's Fossil Energy demonstration program currently supports five major synthetic fuel
projects estimated to cost over $2.7 billion through FY 1985. (This include only construction
costs and does not include plant operating expenses in the Fossil Energy R&D account
which would cost an additional $1.9 billion.) These projects, all in the final design or site
preparation stages, include: SRC I and II direct coal liquefaction, Memphis medium Btu coal
gas, Conoco high Btu coal gas and Illinois Coal Gas Group's high Btu coal gas project.

•

DOE's Alternative Fuels Program has a total.of $5.5 billion available from 1980 budget
authority including $0.5 billion for feasibility studies and cooperative agreements and $5
billion for financial support (i.e. loan and price guarantees) for synfuel projects under the
Non-Nuclear R&D Act ($2 billion) and the Defense Production Act ($3 billion).

•

The SFC has $12.2 billion to support synthetic fuel projects through price supports, purchase
commitments, loans, loan guarantees, joint ventures and Government-owned facilities.

Proposed Change
Terminate additional subsidies for project feasibility studies and cooperative agreements ($300 million
savings in budget authority) and DOE funding for synthetic fuel demonstration projects in fossil
energy construction budget. Consolidate DOE alternative fuels program in the SFC after the SFC is
declared operational by the President. Under existing statutory authority transfer uncommitted and
unobligated DOE interim Alternative Fuels Program funds to the SFC on June 30, 1981.

Rationale
By allowing DOE synthetic fuel demonstration projects to compete for funding in the SFC a more
effective and focused synthetic fuels program will result.
The Administration policy of eventually focusing all synfuels construction projects in the SFC will
capture all of the important benefits of the previous programs while minimizing Federal costs. This
policy will have several major advantages:
•

It will allow project selections to be made on technical and economic merit; the independent
nature of the SFC will help insulate project selection from undue political influences.
131

•

It will restore management of the projects to the private sponsors, who will also be expected
to have a considerably larger financial stake in the success of the projects. By requiring the
private sector to bear more of the risk for these plants we increase the chances for project
success, decrease Government costs, provide funding certainty (rather than the uncertainy
associated with the annual appropriation process) and allow the private companies and
vendors to fund and manage projects and market products of synfuels plants. As noted in a
recent General Accounting Office study, Government project management has injected costly
delays and other difficulties into the construction and operation of major synfuels facilities.

•

It will allow very substantial reductions in Federal outlays. By allowing the SFC to consider
funding projects currently being funded by DOE, we can save taxpayers over $2.7 billion in
budget authority for construction over the next 5 years and another $900 million in operating
expenses.

These savings can be achieved without compromising the pace of development of synthetic fuels given
the very substantial support that the Synthetic Fuels Corporation can offer.
The Administration is also proposing to rescind $300 million in budget authority for additional
feasibility and cooperative agreement studies. This program basically subsidizes companies to do
design studies so that they can later ask the Government for construction subsidies. Cutting out
Federal involvement in this activity will not only reduce the Federal cost of synfuels programs but
will also encourage companies to develop the capability to do their own studies. It is questionable
whether any company which does not have either the technical ability or the relatively small financial
resources necessary to do a feasibility study will be able adequately to share risk or provide the sound
management necessary to construct and operate a commercial synfuels facility successfully.

Key Facts About the Program
•

The following demonstration projects, currently part of the DOE Fossil Energy program, will
be affected by this policy. These project sponsors may submit proposals to the SFC.
Project/
Process

Proposed Location

Industrial Sponsors

Description

SRC-1

Newman, KY

International Coal
Refining Co. (ICRC)
(Wheelabrator-Frye,
Air Products &
Chem.)

Demonstration module to
convert 6000 t / d of highsulfur coal into solid
and liquid fuels equivalent
to 20,000 b / d of crude oil

SRC-II

Morgantown, WV

SRC International Inc.
(Gulf Oil subsidiary

Demonstration module to
convert 6000 t / d highsulfur coal into 20,000
b / d (equivalent) of
liquid fiiels.

Conoco Coal Development Co. (with 9member consortium)

Demonstration plan to
convert 1270 t / d highsulfur coal into 19
million cubic feet/d of
pipeline quality gas.

High-Btu Gas
Noble County, OH
Demo/BGC-Lurgi
Slagging
Gasifier
High-Btu
Gas Demo/
COGAS

Perry County, IL

Illinois Coal Gasification group (ICGG)
(5 Illinois gas
utilities)

Demonstration-plan to
convert 2210 t / d highsulfur coal into 23
million cubic feet/d of
pipeline quality gas &
1720 bbl/d of liquids

Med-Btu
Gas Demo/
U-GAS

Memphis, TN

City of Memphis,
Light, Gas & Water
Division

Demonstration plan to
convert 3110 t/d highsulfur coal into 154
million cubic feet/d
of industrial fuel gas

132

•

Private sector cost sharing for most of these projects is minimal, in some cases less than 5%
of the total project cost which could exceed $2 billion for some projects. It will be necessary
for the private sponsors of the DOE demonstration projects to restructure their current
financial arrangements in order to compete for SFC support. But in a time of severe fiscal
stringency, it is unconscionable to allow projects to proceed on the current basis of minimal
private contribution and enormous taxpayer support.

•

A recent GAO report, which examined Federal costs for the coal liquefaction program,
concluded that "premature commitment to contracting and poor construction and contract
management — greatly increased costs and schedule slippages." GAO concludes that, "larger
investments by private sponsors and sharing of cost growth provides an incentive to private
sponsors to control costs and helps to assure that each party is fully committed to the success
of the project."

•

There is a danger that by subsidizing too many projects too early, we increase chances for
bottlenecks and key component shortages. This will substantially increase delays and total
costs of the program.

•

Supporters of the Memphis Project have said that funding the project in SFC could save up
to $200 million and reduce project delays resulting from the existing Federal procurement
process and project management.

•

Recently one of the supporters of a proposed high Btu coal gasification demonstration
announced that it no longer supported construction of the project and that it supports the
President's policy in the synfuels area. The Company allegedly will build a smaller diameter
gasifier with several other companies using private funds..

•

The DOE demo projects could be supported by the SFC either as full scale synthetic fuel
projects using loan and price guarantees, purchase agreements or loans, or as synfuel project
modules using the joint venture provisions of the Energy Security Act (ESA) (42 U.S.C.
8736). There clearly does not have to be any amendment of the ESA to allow projects
presently being supported by DOE to apply for or receive assistance from the SFC.

133

Uranium Enrichment
Agency: Department of
Energy

Functional
Code: 271

Funding
1982

($ in millions)
1984
1983

1174
76

423
124

135
-178

-843

^135
-355

331
76

68
-231

1981
CARTER BUDGET:
Budget Authority
Outlays
REESTIMATES & ADJUSTMENTS:
Budget Authority
Outlays
PROGRAM CHANGES
Budget Authority
Outlays
REAGAN BUDGET:
Budget Authority
Outlays

Budget Reform
Criterion: 6
1985

1986

144
-134

153
277

161
248

+ 64
-22

-5
-16

-41
-27

-29
- 48

200
-200

96
-150

160
250

230
230

— Reduction in contract authority not appropriation.

Program Description
The Uranium Enrichment program produces fuel for all domestic and many foreign nuclear power
plants. Its obligations and expenditures are offset to a great extent by revenues generated from the
sale of enriched uranium.
Fuel (enriched uranium) is currently produced at the three gaseous diffusion plants (GDPs) located at
Oak Ridge, Tennessee; Paducah, Kentucky; and Portsmouth, Ohio.
Construction of the Gas Centrifuge Enrichment Plant (GCEP) is under construction at Portsmouth,
Ohio using advanced and more efficient gas centrifuge technology.
PROPOSED CHANGE:
•

In FY 81, a reduction in contract authority, a type of budget authority, which the program
no longer needs because incoming revenue is now sufficient to cover expenses.

•

In FY 82, a drop in production from the gaseous diffusion plants which will reduce power
requirements for the plants by 1000 megawatts below the Carter Budget. The reduction will
yield a savings of $189M in FY 82 with no disruption in meeting demand.

•

In FY 82, an increase in the price of Separative Work (SWU) yielding an additional $149M
in revenues. The price increase will be accomplished by raising the interest rates on plant
and capital and by factoring in a reduced level of production.

•

In FY 83 to 86 changes in power cost estimates due to higher power escalation rate
projections and increases in revenues resulting from the FY 82 price increase.

Rationale
The reduction in operating levels of the gaseous diffusion plants will save $200M in FY 82 and can be
accomplished without impairing the Department's ability to meet demand for enriched uranium. The
price of the product is being increased in keeping with the Administration's concern that the costs of
special government programs be borne more directly by those whose receive the benefits.

Key Facts About the Program
•

The FY 82 level of production is 9.5 million Separative Work Units (SWU's). This is the
same as the FY 81 level but 4 million SWU less than the Carter level.

•

The reduced operating levels in FY 82 at the GDP plants will provide enough production to
meet demand by drawing down the SWU stockpile of 30 million by 4 million SWU's.

•

Current demand by domestic and foreign customers in FY 82 is 14 million SWU's.

134

•

A normal stockpile requirement (e.g., for working inventory) is 14 million SWU's (16 million
less than DOE is presently maintaining).

•

These reductions in operating levels will have no effect on employment at the GDP plants.

•

The SWU price increase in FY 82 will increase the electricity rates for those consumers
served by nuclear power by less than 1%.

•

The SWU price increase will continue to make the US produced enriched uranium the most
competitive in the world. The price increase of $11 per SWU will put the DOE price at
$130 per SWU which is $30 below the market price charged by foreign competitors. This
increase is the legal limit permitted by legislation.

•

Continuation of GCEP funding will result in a 1994 completion date. The centrifuge
technology will consume only 5% of the power of the GDP plants for the same level of
output. Its highly efficient production methods will have the effect of reducing the price of
SWU by 15% in present dollars. Over 3,000 people will be employed in the Portsmouth,
Ohio area during the construction of this project. An addition 1,000 people will be
employed nation-wide in support of machinery and component production for GCEP.

•

There is no change in the construction schedule of the Gas Centrifuge Enrichment Plant at
Portsmouth, Ohio.

135

Department of Health and Human Services

137

Aid to Families with Dependent Children (AFDC)
and Child Support Enforcement (CSE)
Agency: Department of
Health and Human Services

Functional
Code: 609

Funding
1981
CARTER BUDGET:
Budget Authority
Outlays
REESTLMATES & ADJUSTMENTS 27
Budget Authority
Outlays
PROGRAM CHANGES:
Budget Authority
Outlays
REAGAN BUDGET:
Budget Authority
Outlays

1982

Budget Reform
Criterion: 1
($ in millions)
1984
1983

1985

1986

1.121
7,793

5.731
7,685

8,043
8,043

8,314
8,314

8.621
8,621

8,907
8,907

-22
-24

-147
-194

-351
-351

-474
-474

-592
-592

-732
-732

—

-651
-651

-817
-817

-899
-899

-990
-990

-1,018
-1,018

4,933
6,840

6.874
6,874

6,941
6,941

7,039
7,039

7,157
7,157

7,705
7,817

^ Includes proposed legislation items.
The Carter budget already included savings for proposed legislation adopted in the Reagan revisions, as follows:
1982
1984
1981
1983
1985
-1,182
-1.360
-1,456
Budget Authority
-1,563
-1.182
Outlays
-1.360
-1,456
—
-1,563

1986
-1,609
-1,609

Program Description
AFDC is often viewed as the primary Federal welfare program (although SSI spends as much for the
poor). AFDC is administered by the States with Federal matching funds ranging from 50% to 83%.
Within benefit standards established by each State, cash assistance is provided to low-income families
based on household size and family income. Family eligibility and benefits depend greatly on what is
counted as income.
CSE is designed to reduce AFDC costs by helping States locate absent parents who are liable for
child support and enforce collection of such support (this program can also be used by non-AFDC
families). The Federal government finances 75% of the State's administrative costs and shares in
collections for AFDC cases in the same proportion as the AFDC matching rate for that State.
Incentive payments (15% of the amount collected) to cooperating jurisdictions are paid out of the
Federal share of collections. While the States reap large net savings from this program, the Federal
government incurs substantial net costs.

Proposed Change
A legislative package is proposed with most of the savings accounted for by addressing the treatment
of family income for AFDC purposes and greater sharing of CSE costs by non-Federal sources.
AFDC:
•

Retrospective accounting and monthly reporting — States would be required to determine
each month's AFDC benefits based on the family's income and circumstances in the previous
month. This would replace the current prospective procedure of estimating future income
and family circumstances to calculate benefits, which can result in overpayments and
undetected ineligibility and may take several months to correct, if at all.

•

Stepparent income — The income of stepparents and those assuming the role of stepparents
would be counted in determining a child's eligibility and benefits for AFDC, in contrast to
current Federal requirements which do not assume any financial responsibility on behalf of
stepparents. This proposal would eliminate the anomalous situation of providing AFDC to a
child who is an integral part of a household that is not eligible for AFDC, but should be
expected to support her/him.

139

Earned Income Tax Credit (EITC) — Advance payment of the EITC would be assumed and
counted against a family's monthly AFDC payment (the EITC can now be taken either on
ail advance payment basis or as a lump sum payment with the family's income tax refund).
This proposal would correct the present inequity by which those receiving EITC payments
monthly get their AFDC payments reduced and those who receive their benefits in the form
of a tax refund have that amount incorporated into their asset base, which only marginally
affects AFDC payment levels. It would also take into effect more appropriately the income
AFDC families are receiving, and thus better reflect the family's actual current need for
public assistance.
Minimum AFDC payments — AFDC payments below S10 per month would be prohibited.
This simplifies administration for marginal cases, especially those that may fluctuate on and
off the rolls, with little effect on AFDC family income, and would affect only higher income
AFDC families.
State and local training costs — The Federal matching rate would be reduced from the
current 75% to 50%, the same as for other regular AFDC administrative costs. This change
will encourage States to evaluate training needs on the same basis as other administrative
priorities, rather than skew such judgments toward the richer Federal match.
Countable other income — States would be permitted to offset a family's AFDC grant to the
extent (or any fraction thereof) that (1) the family's food stamp bonus duplicates the State
AFDC food need standard, and (2) the Federal rent subsidy (Section 8 or public housing)
exceeds the State AFDC shelter need standard. This will allow States to take into account the
other sources of support AFDC recipients have and would reduce the effect of pyramiding
various public assistance benefits that result in high total income to welfare families. This will
also enable States to target more funds on the truly needy by increasing AFDC benefit
levels as well. (Note-—not all States have a shelter need standard and would be required to
establish one.)
Limited eligibility to 150% of Needs Standard — Families with gross income greater than
150% of the State needs standard would be ineligible for AFDC. Families with income over
the 150% level can now be eligible for AFDC due to the disregard of earned income because
of child care costs, work-related expenses, and other disregards. Families with such high
incomes have resources on which to rely and should not draw on public assistance resources
that should be reserved for these unable to support themselves.
Individuals over age 18 — Children over age 18 would be ineligible for AFDC unless they
were in their senior year of high school. Current AFDC policy is a remnant of the time
when the age of majority was 21. Individuals over 18 are legally adults and should be
independent. AFDC should be reserved for children who are truly dependent
Standard work-related expense disregard — Work-related expenses and child care, which are
at present unlimited disregards for earned income, would be capped at $75 and at $50/child,
respectively. There would also be disregarded 1/3 of the earned income remaining after all
other disregards has been subtracted form total earned income—at present, the "one-third"
disregard applies before the work expense and child care disregards are substracted from
earned income.
These provisions will greatly simplify AFDC administration and address a major source of
error and abuse. They will also provide a. strong incentive for AFDC recipients to economize
on their work and child expenses. Altering the order of application of the "one-third"
disregard will ensure that one-third of work-related expenses are not accounted for twice.
"$30 and 1/3" four-month rule — The "$30 and 1/3" disregards noted above would apply
only to those AFDC recipients who obtain work when they are already on the rolls, and then
only for a four-month period. This is a sufficient transition period and provides an incentive
for AFDC recipients to join the labor force. It is not reasonable to continue to substantially
increase welfare families' income indefinitely once they are capable of meeting their own
needs through employment.
Resource limits — A limit of $1,000 (equity value) would be placed on an AFDC family's
allowable resources. As a result of a recent court decision, resources are valued based on fair
market value less encumberances (equity value) rather than full market value, which was the
measure used by many States to determine their resource limits prior to the court decision.
Because of the change, the value of excluded resources will be considerably more than most
States intended.

140

Community work experience — Each State shall be required to establish and maintain a
community work experience program approved by the Secretary of HHS for those
individuals required to work (exceptions would be the disabled, persons under 18 or over 65,
those working full-time, or mothers with very young children) as a condition of receiving
AFDC. Community jobs would be provided if private sector jobs were unavailable. This
mandatory requirement for AFDC recipients would encourage attachment to the labor force
and self-support and would reduce the public assistance rolls so that more resources would
be available for the truly needy.
Lien provision — States would be permited to place a lien on an AFDC recipient's house for
the value in excess of the average value of all houses in the State. The lien would be satisfied
on transfer of ownership of the house, except that it would be deferred as long as a member
of the household eligible for AFDC continues to reside in the house. Many recipients of
AFDC own a valuable home that is not considered an asset for purposes of eligiblity. This
proprosal would allow the AFDC recipient to retain his home, but upon the sale of the
house the State would be able to recover some of the benefits paid during the period of
need.
AFDC-U primary wage earner — For two-parent AFDC families, the unemployed parent
shall be defined as the primary wage earner. At present, the' States operate under an
"unemployed parent" concept. Under the unemployed parent concept, either parent can
qualify as the unemployed parent, and even if the other parent were employed, the family
could still be eligible for AFDC benefits under the current earning disregards. Adopting the
primary wage earner concept will relate eligibility for AFDC more closely to a family's actual
need for public assistance.
Non-recurring lump-sum payments — Lump-sum payments would be considered available to
meet ongoing needs in the AFDC programs, i.e., the lump-sum payment would be
considered as income in the month received. If such a payment exceeded the standard of
need, the household would be ineligible for aid. Any amount of the lump-sum payment that
exceeded the monthly needs standard would be divided by the monthly needs standard, and
the household would be ineligible for aid for the number of months resulting from that
calculation.
Under current law, all income available to recipients of AFDC is supposed to be taken into
account in determining benefit amounts and continued eligiblity. However, the law is
sufficiently vague that there is currently no way to ensure that one-time lump-sum payments
are spent for any purpose related to the family's needs over a period of time.
If a recipient receives an inheritance, lump-sum insurance, death or disability payment,
income from the sale of property, or income tax refund, the money may be spent
immediately on any item. If that occurs, the welfare grant is not reduced or eliminated in
future months even though the lump-sum payments would have been sufficient to meet
basic living requirements for several months if properly budgeted. This proposal would
overcome this deficiency in current law by considering lump-sum payments as income in the
month received. Individuals would be held responsible for prudent use of such income.
Vendor payments — The provision limiting vendor payments to 20% of AFDC cases would
be eliminated. Present law restricts the number of vendor payments (direct payments by the
welfare agency for housing, utilities, etc.) to 20% of the AFDC caseload in a State. At
present, welfare recipients could spend their AFDC benefit for other items, and the vendors
can have great difficulty in collecting what is legitimately owed them. Removal of this
arbitrary limitation will make vendors more willing to provide housing, utilities, etc., to
welfare recipients, since they would be assured of receiving payment.
Recoupment of overpayments —- Any overpayment or underpayment of assistance would have
to be corrected as a basic policy of efficient and equitable program administration. Recovery
of any overpayment of assistance would be made from a recipient's current assistane
payments, available income and resources, and/or legal process.
There is no specific reference in current law to the adjustment of overpayments in the
AFDC program. Federal regulations hold that overpayments cannot be adjusted unless the
recipient willfully failed to report a significant change in circumstances or has some current
resource, such as exempt earned income or money in the bank. This proposal would mandate
recovery of overpayments from future grants or other income. In addition, retroactive
corrective payments of underpayments would not be considered as income or as a resource
in the month paid or the next months.
141

•

Deeming Provision — This proposal would consider the income of the sponsor part of the
income of the immigrant during the immigrant's first three years in the U.S. for purposes of
determining eligibility for AFDC, Medicaid and Food Stamps. Exceptions would be
permitted when sponsors are unable to take care of the immigrants because of unforeseen
circumstances. Our immigration policy is to admit members of families and others based on
the sponsor's demonstrated ability and willingness to provide support.

•

Offers of employment of college students — AFDC parents who are attending college would
be required to register for work and to meet all other work requirements under the AFDC
program. Under current law, an individual may be exempt from the AFDC work
requirement and can get a college education at the expense of the taxpayers without having
to meet the scholarship and other requirements for education grant or loan programs. The
AFDC program was designed to meet the basic living requirements of needy children and
their families, not to enable individuals to attend college at taxpayers' expense. It is
inequitable to allow able-bodied adults to avoid the work registration requirement because
they are atending school, while the taxpayers who pay for their welfare assistance may be
unable to afford to go to college themselves or to send their children to college.

•

Aid to strikers — Participation in a strike because of a labor dispute (other than a lockout)
shall not constitue good cause to leave, or to refuse to seek or accept, employment.
Individuals unemployed by reason of going on strike would therefore be ineligible for AFDC
benefits. Current Federal law does not expressly prohibit strikers from obtaining AFDC
benefits. In States where strikers can qualify for AFDC, the first day of a strike produces an
immediate surge in applications. AFDC caseloads continue to increase during the strike until
most eligibles have found their way onto welfare. When the strike is ended, however, some
remain on the rolls. Because of income disregards contained in the law, some persons may be
able to remain on the welfare rolls indefinitely. This is inconsistent with the basic purpose of
the AFDC program, and reduces the resources available for the truly needy.

•

National Recipient Information Systems — A National Recipient Information System (NRIS)
would be established to collect information from the States and, in turn, provide them with
information on individuals receiving public assistance. Central collection of information on
recipients of and applicants for public assistance and dissemination of the information to the
States will simplify and standardize information collecting and reporting requirements placed
on the States, make information available on a more accurate and timely basis, and improve
the administration of the various assistance programs. The system should serve as a strong
deterrent to fraud and abuse.

•

Access to information — Information concerning applicants for, or recipients of, aid would
be made accessible to any State or local agency for public assistance purposes. Access to
information on such individuals is essential to fair and efficient administration of public
assistance. The leading cause of error in the AFDC program, underreporting of income,
could be reduced through access to more complete inormation.
State and local administrative savings from these AFDC provisions would be $105 million.

CSE:
•

Funds for non-AFDC cases — An applicant fee of 10% of collections would be charged to
defray at least part of the costs for non-AFDC cases. This proposal would alleviate the cost
burdens on State and Federal governments for activities in which they have no direct
interest, since no AFDC collections are involved. This proposal would also prevent relatively
well-off non-AFDC families from using CES services for free. More resources would also be
freed up to obtain increased AFDC collections.

•

Collection of alimony or Spousal support — CSE activities would be expanded to cover
collection and distribution of alimony for current AFDC cases nn the same way as child
support. Present law authorizes only the collection of child support. This proposal would
resolve problems where existing support orders do not differentiate between alimony and
child support, which makes it difficult for local CSE agencies to make and correctly
distribute collections.

•

Financing of State and local incentive payments — The incentive payment of jurisdictions
that cooperate with other jurisdictions in collecting child support would be financed jointly
by the State and Federal governments in the same proportion that they share in CSE
collections. At present, the incentive payment (15% of collections) is financed entirely out of

142

the Federal share of CSE collections. This proposal would go far to redress the State-Federal
imbalance in net return from the CSE program.
•

Federal income tax refunds — The IRS would halt and collect from an absent parent's
Federal income tax refund the amounts owed for child support arrearages identified by a
State. Due process would protect the individual's rights. A number of States have used this
procedure successfully and have found that many absent parents began making regular
support payments when they learned of the existence of the procedure. Under current law,
IRS already makes collections from income tax refunds for child support in those cases
where a State has certified that it is unable to make the collection.

•

Child support obligations discharged in bankruptcy — The Bankruptcy Act would be
amended to prohibit the discharge in bankruptcy of child support obligations. Fulfillment of
child support obligations is crucial to the benefit of inividual children and to overall social
policy. Failure by an individual to meet the obligation results in a burden on the State and
Federal governments, and may also mean less support for the child even if the child receives
AFDC benefits. States indicate that they have had to pay large amounts for child support of
bankruptcy individuals. Child support should be honored even by someone who is legally
bankrupt.

143

Reduce Alcohol, Drug Abuse and Mental Health
Research and Training
Agency: Department of
Health and Human Services

Functional
Code: 552,553

Funding
CARTER BUDGET:
Budget Authority
Outlavs
REESTEV1ATES & ADJUSTMENTS:
Budget Authority
Outlays
PROGRAM CHANGES
Budget Authority
Outlays
REAGAN BUDGET:
Budget Authority
Outlays

1981

1982

356
324

390
341

Budget Reform
Criterion: 6
($ in millions)
1984
1983

1985

1986

404
353

419
366

434
379

450
392

24
-33
-9

-46
-18

-154
-107

-169
-116

-184
-129

-200
-142

323
315

344
347

250
246

250
250

Program Description
ADAMHA provides support through grants and contracts, as well as through direct Federal programs,
for research and training activities in the areas of alcohol, drug abuse, and mental health. In total, the
1981 and 1982 Carter budget provided increases over the 1980 levels of $9 and $43 million in 1981
and 1982 budget authority, including about $77 and $100 million for new awards to conduct research
in biomedical and behavioral sciences and to train researchers and health personnel in these areas.

Proposed Changes
The Reagan Budget proposes rescissions of $32 million in 1981 budget authority and reductions of
$46 million in 1982 budget authority for these programs. Funding for new starts in biomedical
research and research training would be $45 million in 1981 and $51 million in 1982 budget authority.
Continuations would be funded, but no new awards would be supported in 1981 and 1982 for social
sciences research and research training. No new awards would be made in 1981 and 1982 for funding
clinical training and by the end of 1982 all clinical training programs would be phased out.

Rationale
Research
Reductions in 1981-1986 are proposed to slow the rate of growth of funding for
ADAMHA biomedical research to a rate below projected inflation and to reduce the level of funding
for social sciences research below current levels. Across the board reductions in Federal spending —
including research — are necessary for economic recovery; social sciences research has been reduced
substantially because this research has been less productive than biomedical research.
Research Training. The level of support for trainees in social science areas has been reduced. In
addition, institutional overhead has been eliminated from the National Research Sendee Act research
training awards because the Federal Government should not pay higher costs to support a research
trainee than are normally charged for a nonfederally supported student at the same institution.
Clinical Training. The supply of mental health professionals is now generally adequate, mental health
professionals generally have a good income potential, and thus Federal subsidies for such training are
no longer necessary.

Key Facts About the Program
Since 1963, the supply of psychiatrists, psychologists, psychiatric social workers, and psychiatric nurses
has almost doubled:
•

psychiatrists: from 16,000 to about 30,000;

•

psychologists: from 20,000 to more than 40,000;

144

•

employed registered nurses — of whom about 4% specialize in mental health — from
one-half million to over a million;

•

social workers in the National Association of Social Workers — of whom about 14%
specialize in mental health — from 36,000 to 76,000.

Mental health professionals are employed not only in hospitals, clinics, and mental health facilities,
but also in courts, correctional institutions and schools. Many other paraprofessionals are now also
providing mental health services.
Ratio of ADAMHA service providers to general population:
•

Psychiatrists

12.1 per 100,000 (1977)

•

Psychologists

11.8 per 100,000 (1976)

•

Nurses

18.1 per 100,000 (1972)

• * Social Workers

34.9 per 100,000 (1978)

•

250 per 100,000 (estimate)

Paraprofessionals

Salary level of ADAMHA service providers:
•

Psychiatrists: Average 1978 income of $49,000.

•

Psychologists:
$35,000.

•

Nurses: In 1978, for a beginning psychiatric nurse, $15,000; median $17,500.

•

Social Workers:
$25,000.

For psychologists with doctoral level training, median 1978 income of

In 1978, for a beginning masters level social worker, $17,500; median

145

Energy And Emergency Assistance Block Grant
Agency: Department of
Health and Human Services

Functional
Code: 609

Funding
1981
CARTER BUDGET:
Budget Authority
Outlays
REESTEVIATES & ADJUSTMENTS
Budget Authority
Outlays
PROGRAM CHANGES:
Budget Authority
Outlays
REAGAN BUDGET:
Budget Authority
Outlays

1982

Budget Reform
Criterion: 7
(S in millions)
1984
1983

1985

1986

1,893
1,907

1,910
1,910

1,911
1,911

1,914
1,914

-493
-507

-509
-509

511
511

1,400
1,400

Program Description
The Federal Government assists low-income households in meeting high energy costs and households
in need of emergency financial aid or other crisis support through grant programs administered by the
Department of Health and Human Services. Although these categorical programs share common goals,
differing requirements for eligible services and recipients restrict State flexibility in meeting priority
needs in the most cost-effective manner. For example, only energy costs are eligible services undej
one program but a broader definition of assistance is authorized under the smaller emergency
assistance (Title IV-A) program. Grants under Title IV-A of the Social Security act may be used to
provide emergency assistance only to needy families with children and not, for example, to an elderly
person living alone, who may need emergency assistance as much or even more.

Proposed Change
As part of the effort to consolidate categorical programs into block grants to States, the Administration
proposes to replace HHS low-income energy assistance -and emergency assistance programs with a
flexible block grant to States for energy and emergency assistance. State matching fiinds will not be
required. Under this proposal, States would have complete flexibility in the delivery of fuel assistance
and other emergency services to meet the needs of their citizens.

Rationale
Consolidation of energy and emergency assistance activities into a block grant to States will eliminate
unnecessary restrictions on those programs and increase State flexibility in delivering this type of
assistance. This increased flexibility is especially important for energy and crisis assistance, given the
severe consequences of a State's inability to act swiftly to assist a poor family heat their home in an
unusually severe winter or help a family in a fire, flood or other crisis situation. States are in a better
position to determine the most appropriate distribution of these funds, since they are closer to the
individuals and families needing assistance.
Under the Administration's proposal, States could adopt innovative aproaches to deliver more
cost-effective energy and emergency assistance. For example, grants under the low-income energy
assistance categorical program cannot be used for low cost conservation projects or minor home
repairs which could lower fuel bills or avoid major breakdowns of heating equipment. Under the
block grant proposal, States would be free to use these funds to reduce potentially higher future
energy consumption and costs. States would also have greater flexibility in the delivery of services
provided in the event of emergency situations. For example, temporary financial asistance, food,
clothing, shelter, emergency medical care or social services could be given to assist a family in a
emergency. In a crisis situation, State and local officials would not have to stop and ask themselves
"Can I use these Federal funds to provide this particular service, good, money, etc. to this family?"

146

Key Facts About the Program
•

Only 27 States participate at present in the emergency assistance program which has certain
serious shortcomings, e.g., States cannot determine who can participate types of emergencies
covered, and the duration and frequency of payments.

147

Health Block Grants
Agency: Department of
Health and Human Services

Functional
Code: 551

Funding
1981
CARTER BUDGET:
Budget Authority
Outlays
REA ESTIMATES & ADJUSTMENTS:
Budget Authority
Outlays
PROGRAM CHANGES:
Budget Authority
Outlays
REAGAN BUDGET:
Budget Authority
Outlays

—

1982

Budget Reform
Criterion: 7
($ in millions)
1984
1983

1985

1986

1,753
621

1,753
1,581

1,753
1,770

1,753
1,753

371
121

371
581

371
570

371
371

1382
500

1,382
1,000

1,382
1,200

1,382
1,400

1.382
1,400

Program Description
Through the years, a complex, duplicative, and uncoordinated array of some 25 Federal health service
programs has developed. These programs provide services based on varying criteria including age,
income, health status, disease category, occupation, and residence. Most of the programs overlap and
duplicate other programs in services provided and/or populations served. Some of these programs are
formula grants to States for provision of sendees at the local level, usually by local governments .or
agencies. Others make project grants or provide in-kind sendees or federally paid workers to local
public agencies, community-based organizations, and similar non-profit groups. Each program
generally has its own separate planning process.

Proposed Change
As part of the effort to return decisionmaking authority, where appropriate, to States and localities,
the Administration proposes to consolidate the present collection of 25 Federal categorical health
sendee grants into two block grants to States: health services and preventive health services.

Rationale
Aside from the confusion caused by the total lack of coherence in the Federal delivery effort itself,
day to day management has developed into a costly bureaucratic morass of planning, regulating, and
reporting at the Federal, State, and local levels. The problems of categorical grant programs are not
limited just to this waste and inefficiency or to management difficulties. Because of the fragmented
nature of the current funding system, often persons in need of these services must go to several
different and unrelated grantees for different services and must receive related health services from
different providers.
The current system's administrative requirements have resulted in nearly
insurmountable barriers for States, local governments, communities, and even individual providers
who wish to integrate funds from all grant programs into comprehensive assistance systems.
The Administration's block grant proposal will enable States to plan and coordinate their own service
programs, establish their own priorities, and exercise effective program control over resources provided
to localities and non-profit organizations. This approach will reduce the multiplicity of rules and
regulations (and, hence, Federal direction) under which service agencies currently operate. States will
thus have greater flexibility—as well as greater responsibility for results—in providing needed health
sendees to their populations. Overlapping funding from different programs for the same services
could be eliminated. States could select the service delivery agency best able to provide certain
services that are now provided by direct Federal grantees. The overall result would strengthen State
governments and provide publicly-fmanced services more effectively and at lower costs to those in
need.

148

Appropriation action has been proposed to carry out the Administration's proposal, effective in
October of this year, contingent upon enactment of authorizing legislation which will be submitted as
soon as possible. The proposed funding level for 1982 is 75% of the 1981 current base or $1,382
million. Because the new block grant legislation would allow significant savings in program overhead
and more efficient service delivery due to the elimination of overlapping service responsibilities, this
funding change need not result in a reduction of sendees.

Key Facts About the Program
•

Over 1,600 Federal employees manage these programs.

•

There are over 12,000 grant sites.

•

There are 218 pages of Federal law and 235 pages of Federal regulations for these programs.

•

365,000 manhours are required each year to complete Federal reports.

•

The programs included in the health services block grant are:
— Primary Health Care Centers
— Primary Care Research and
Demonstrations
— Black Lung Clinics
— Migrant Health
— Home Health Services
— Maternal and Child Health
Services
— Maternal and Child Health/
Supplemental Security Income
Disabled Children's Services

•

— Hemophilia
— Mental Health Services
— Drug Abuse Community
Projects
— Drug Abuse Grants to States
— Alcoholism Community Projects
— Alcoholism Grants to States
— Emergency Medical Services
— Sudden Infant Death
Syndrome

The programs included in the preventive health services block grant are:
— High Blood Pressure Control
— Risk Reduction and Health
Education
— Flouridation
— Lead-Based Paint Poisoning
Prevention

—
—
—
—
—
—

149

Family Planning Sendees
Health Incentive Grants
Venereal Diseases
Rat Control
Genetic Diseases
Adolescent Health Sendees

Social Services Block Grant
Agency: Department of
Health and Human Services

Functional
Code: 506

Budget Reform
Criterion:
6

Funding
1981
CARTER BUDGET:
Budget Authority
Outlays
REESTIMATES & ADJUSTMENTS:
Budget Authority
Outlays
PROGRAM CHANGES:
Budget Authority
Outlays
REAGAN BUDGET:
Budget Authority
Outlays
1/

($ in millions)
1983
1984

1982

1985

1986

5,251
5,281

5,539
5,547

5,767
5,751

5,951
5,936

6,030
6,015

-1,451
-1,208

-1,739
-2,037

-1,967
-2,251

-2,151
-2,436

-2,230
-2,515

3,800
3,500

Some activities were previously classified in function 609 (income security).

Program Description
The Federal Government funds numerous programs to help low-income individuals and others with
special needs become self-sufficient, to prevent unnecessary institutionalization, and to protect
children from abuse and neglect. While each program was established to meet laudable goals, in
practice they often overlap and duplicate other services and target populations. For example, the Title
XX, child welfare and child abuse programs all fund child welfare-related activities. Community
action agencies in localities receive funding directly from the Federal Government for social services
which are also funded through the States under Title XX. Differing Federal mandates and eligibility
requirements make it difficult for States and local communities to tailor services to needy
beneficiaries. More often than not, Federal requirements outweigh recipient needs in deciding who
gets what type of service in which location.

Proposed Change
The Administration proposes to replace various Federal categorical social service programs with a
flexible block grant to States. .States would be free to decide what mix of social services are provided,
by whom, and under what eligibility conditions. Burdensome Federal regulations, reporting
requirements, standards, etc., would be eliminated. States would thus have greater flexibility — and
be accountable for results — in meeting the needs of low-income persons and those with special
needs, including children at risk and the disabled. No matching or maintenance of effort requirements
would be imposed on States.

Rationale
Consolidation of categorical grant programs into block grants is an important element in the
Administration's effort to return major responsibility for the administration of various health,
education, and social service activities to the States, while slowing the rate of growth of Federal
spending.
In the area of social services, the Administration's proposal would significantly reduce State and
grantee administrative costs associated with meeting Federal planning, auditing, and reporting
requirements. States would be free to develop innovative delivery systems which emphasize continuity
of care for individuals rather than fragmented systems which force clients to shop around among
numerous local providers. States could devote more resources to high priority services. For example,
one State may have a much higher foster care caseload than another State, requiring relatively more
resources for child welfare service activities. Another State may need more money for homemaker
services.

150

Greater State flexibility in delivering social services will also eliminate much of the present duplication
of services which constitutes a drain on State resources. For example, instead of ftmding 5 different
programs which provide similar information and referral services in a particular county and which are
underutilized, the State could fund one such referral center and devote the dollars saved to expanding
other types of services.

Key Facts About the Program
Examples of problems addressed by this block grant:
•

Of 3 providers the General Accounting Office surveyed in Seattle, all received duplicative
funds to provide the same information and referral services. In Los Angeles, 5 of 10 and in
Cleveland, 4 of 7 providers received Federal funds to provide the same information and
referral services, consolidation of information and referral services was recommended (HRD
77-134).

•

In Children Without Homes (April 1977, Children's Defense Fund), proliferation of Federal
funding sources, requirements, and regulations in the child welfare area was criticized.
Administrative and programmatic consolidation was urged.

•

A General Accounting Office study found SI million of duplicative reimbursements for
programs and services, involving only six Community Action Agencies.

•

A General Accounting Office study (HRD 80-43) criticized the lack of coordination on a
Federal level for hindering Developmental Disabilities State Planning Councils' attempts to
use and coordinate activities for a variety of health, education, rehabilitation and other social
sendee programs.

•

The programs which are included in this block grant are:

Title XX Social Services
Title XX Day Care
Title XX State and Local Training
child Welfare Services
Child Welfare Training
Foster Care
Adoption Assistance
Child Abuse
Runaway Youth
Developmental Disabilities
OHDS Salaries and Expenses
Rehabilitation Services
Community Services Adminsitraiton
(except community economic development)

151

Cuban/Haitian Domestic Assistance
Agency: Department of
Health and Human Services

Functional
Code: 609

Funding
CARTER BUDGET:
Budget Authority
Outlays
REESTEVIATES & ADJUSTMENTS:
Budget Authority
Outlays
PROGRAM CHANGES:
Budget Authority
Outlays
REAGAN BUDGET:
Budget Authority
Outlays

1981

1982

90
153

88
83

Budget Reform
Criterion: 1
(S in millions)
1983
1984

1985

1986

73
83

Program Description
The HHS Cuban/Haitian Domestic Assistance program reimburses States for cash and medical
assistance, social services and services for unaccompanied minors to Cuban/Haitian entrants who
arrived in the U.S. since 1980. The program also may fund transitional education assistance (through
the Department of Education) for school districts with large numbers of Cuban/Haitian entrant
children.

Proposed Change
The proposed change would eliminate $15 million in special educational grants to local educational
agencies which had been requested in the Carter budget.

Rationale
In March 1981, school districts received $7.7 million for Cuban/Haitian entrant children for the
1981-82 school year through the Department of Education. Florida received about $5.3 million of the
1981 funds. While current U.S. policy permits special educational assistance funding to school districts
for an entrant child's initial year in the U.S., the $15 million previously requested for 1982 would
actually provide a second year of special educational assistance funding for the 1982-83 school year.
Special educational assistance is best limited to the first year, when school districts are most heavily
affected. Continuation of funding could lead to an entitlement expectation and prove difficult to
terminate, as in the case of the 20 year 1962-78 arrival Cuban Program. In addition, special
educational assistance funding in the form of general grants to school districts may not ensure that
Federal funds are spent only on new services for entrant children.
More appropriate channels for possible educational assistance to Florida include:
Secretary of Education discretionary funds which could be allocated for special uses such as
•
English language instruction. This project approach would ensure that funds are targeted to
services for entrant children.
•
Education and social services block grant funds, from which heavily impacted areas of a
State could receive added funds at the State's discretion.

Key Facts About the Program
•
•
•

Five States have 93% of the new Cuban/Haitian entrant population with Florida alone
having 75%.
Florida is receiving $7 million for FY 81 for educational assistance to Cuban children
through the old Cuban program.
Florida also received $7.8 million for bilingual education (Title VII of Elementary and
Secondary Education Act) during 1980.

152

Health iMaintenance Organizations
Agency: Department of
Health and Human Services

Functional
Code: 551

Funding
1981

1982

Budget Reform
Criterion: 6
(Sin millions)
1983
1984

1985
CARTER BUDGET:
Budget Authority
56X/
48
48
48
48
Outlays
30
31
40
48
48
REESTIMATES & ADJUSTMENTS:
Budget Authority
Outlays
PROGRAM CHANGES:
Budget Authority
-28
-40
-48
-48
-48
Outlays
-10
-22
-32
-42
-48
REAGAN BUDGET:
Budget Authority
28
8
Outlays
20
9
8
6
Excludes $17 million supplemental request for the HMO loan and loan guarantee program which has been

1986
48
48

-48
-48

withdrawn.

Program Description
The HMO program provides grants and loans for the establishment or expansion of HMOs. Loans
may also be awarded for construction of ambulatory care facilities.

Proposed Change
As part of the effort to eliminate unnecessary Federal subsidies, the Administration will propose to
phase out the Federal grant and loan subsidy program to health maintenance organizations (HMOs)
by the end of 1982.

Rationale
The Administration believes that after 8 years of Federal support the feasibility of HMO prepaid
health care delivery has been adequately demonstrated, and that HMOs can be financially
self-supporting institutions developed without continued Federal subsidies. There are now 235 HMOs
with 9 million members located in every urban area with a population greater than 1 million, and
affiliated with 15% of the Nation's physicians. In recent years, substantial amounts of private capital
have been provided for HMO development.
A major impediment to further investment of private capital in HMO development is not a dearth of
Federal support but, rather, the unnecessarily restrictive requirements for Federal qualification
presently found in the Health Maintenance Organizations Act. In fact, artificially high minimum
benefit requirements and organizational standards have been a leading source of defaults among small,
federally supported HMOs that have found that the heavy Federal requirements priced their benefit
packages out of the market.
Amendments will be proposed to the HMO Act, which expires at the end of the fiscal year, to
remedy this problem. Once HMOs are no longer required to undertake uneconomic activities, private
capital should be more available for HMO development, obviating the need for further subsidies.
This proposal will also halt Federal losses from further attempts to start HMOs that are not
economically competitive. The current subsidy program focuses on entities that could not obtain
private financing because of their high risk, and then imposes unusually extensive, costly benefit
packages and other conditions that inhibit their competitiveness. As a result, defaults on unsecured
loans for HMO operating deficits and required interest subsidy payments will exhaust the $35 million
HMO loan revolving fund by the end of the year and will require substantial future spending even
without awarding any new loans.
This proposal should have no significant effect on development of economically viable HMOs, which
can be funded through private sources. Moreover, competitive HMOs will be more effectively
encouraged through the health financing reform proposals that the Administration is developing for
later submission than through grants and loan subsidies.
153

Key Facts About the Program
•

Corporations supporting HMO development or enrollment include R. J. Reynolds, Deere
and Co., General Motors, Chrysler, Ford, IBM, Xerox, Blue Cross/Blue Shield, INA, and
Prudential.

•

Only 2% of medicare and medicaid beneficiaries are enrolled in HMOs due to restrictive
HMO legislation and regulations and medicare/medicaid reimbursement policies.

•

More than half of HMO membership is in private HMOs which have not received Federal
support.

154

Health Planning
Agency: Department of
Health and Human Services

Funding
CARTER BUDGET:
Budget Authority
Outlays
REESTIMATES & ADJUSTMENTS:
Budget Authority
Outlays
PROGRAM CHANGES:
Budget Authority
Outlays
REAGAN BUDGET:
Budget Authority
Outlays

Budget Reform
Criterion: 6

Functional
Code: 553
($ in millions)
1984
1983

1981

1982

146
162

147
160

147
150

-24
-9

-89
-45

122
153

58
115

1985

1986

145
145

-145
-107

-145
-120

-145
-145

2
43

Program Description
The health planning program provides support, primarily through formula grants, for 213 local health
systems agencies (HSAs) and 57 State health planning and development agencies (SHPDAs). The
program has a dual charge to assure equal access to quality medical care and to control costs. The
Federal government now provides 90% of HSA funds and 75% of SHPDA funds.

Proposed Change
The Federal health planning program is proposed for phase-out over the 1981-1983 period, consistent
with a 2-year Administration timetable to develop and carry out health financing reforms that
encourage competition in the health sector. To begin the phase-out, a $24 million reduction in
funding for local health planning is proposed for 1981.

Rationale
As part of the general effort to restrain health care costs by stimulating competition in the health care
industry, the Administration proposes phasing out the Federal health planning program. This program
represents an effort to impose a complex national health regulatory program on States and localities.
Moreover, it has not proved effective in controlling costs on a national basis, and it inhibits market
forces needed to strengthen competition and provide less costly services.
If competitive forces are to restrain costs, free entry into health care markets is essential. Otherwise,
high-cost providers can monopolize health care markets. The certificate-of-need review process
conducted under the health planning program is a system whereby hospitals and other institutional
providers must receive a Government franchise before beginning operations. This system inhibits free
market entry, often propping up high-cost institutions behind a Government-created entry barrier.
Elimination of this franchising system is a necessary element in the Administration's efforts to
promote the effective functioning of private market forces in the health care sector.

Key Facts About the Program
•

Health planning advocates argue that the excess hospital bed supply has decreased, proving
the national effectiveness of the planning program. In reality, 5- States alone accounted for
over 75% of the decreases and the 2 States with the greatest decreases in excess bed
supply—New York and Minnesota—owe their success largely to State rate setting
commissions and strongly pro-competitive environments, not to entry regulation.

•

GAO, in a March 1980 report entitled Unreliability of the American Health Planning
Association's Savings Estimate for the Health Planning Program, disputes the AHPA's claim
that $3.4 billion was saved due to health planning between 1976 and 1978.

155

Health Professions Education
Agency: Department of
Health and Human Services

Functional
Code: 553

Funding
CARTER BUDGET:
Budget Authority
Outlays
REESTIMATES & ADJUSTMENTS:
Budget Authority
Outlays
PROGRAM CHANGES:
Budget Authority
Outlays
REAGAN BUDGET:
Budget Authority
Outlays

Budget Reform
Criterion: 6
(S in millions)
1984
1983

1981

1982

231
418

170
288

170
355

-45
-8

-44
-20

186
410

126
268

1985

1986

170
339

170
291

170
228

-44
-50

-44
-48

126
305

126
289

126
241

126
180

Program Description
The Department of Health and Human Services supports 27 project and formula grant training
programs for institutions and students aimed at increasing the supply of health professionals, primarily
physicians, dentists, and nurses.

Proposed Change
As part of its plans for better targeting the allocation of Federal funds, the Administration proposes to
end large general subsidies for the training of physicians and other health professionals. Such
programs are no longer necessary in light of the growing projected supply of most health
professionals. Instead, Federal programs will be targeted directly on training needs of national priority.

Rationale
During the 1960's and the 1970's the supply of health professionals increased dramatically, partly as a
result of Federal, subsidies of about $18 billion. During the 1970's, the annual number of graduates
from medical schools doubled from 8,000 to nearly 16,000. Today, the Nation as a whole has reached
or exceeded the estimated required level of health professionals for almost every major specialty. The
number of active physicians alone is expected to reach nearly 600,000 by 1990, an increase of 58%
between 1975 and 1990. Moreover, the ratio of physicians per 100,000 population is projected to rise
from 173 per 100,000 to 239 per 100,000 in the same time period.
The Administration will propose legislation to refocus Federal aid on a limited number of national
priority medical specialties, rather than providing large subsidies for all specialties. In addition,
support for training in nonphysician specialities will be focused on occupations such as physicians
assistants and nurse practitioners which help address the problem of maldistribution of health
professionals.
By more directly targeting Federal health professions training subsidies on national priorities, program
costs can be reduced. At the same time, higher-priority, more targeted programs will subsidize the
education of health professionals in those fields where they are most needed.
The proposed change is not expected to affect the projected surpluses for the coming decade in nearly
all health professions areas. Federal student assistance programs in the Department of Education will
continue assisting students to finance their own education and the Department of Health and Human
Services will fund a $120 million grant program for high priority health professions. Included in this
program, the Administration will continue support at the 1981 appropriated level of $20 million for
assistance programs to encourage minorities, who are now under-represented in health professions
fields, to choose health careers.

156

Key Facts About the Program

•

Federal capitation payments amount to only 3% of medical schools' annual revenues.

•

Nurse training will continue to be supported through nursing special projects as opposed to
general support since the total supply of nurses appears to be adequate but too many
qualified nurses have chosen other professions or are being utilized in nonpatient care
positions.

•

Average medical school tuition in 1980 was about $3,000, and was only $1,600 for the
two-thirds of students enrolled in public schools in their own states.

•

There are three times as many qualified applicants as there are spaces available in health
professions schools,, indicating that, even with decreased Federal support, helath professions
enrollment will likely remain at its high current level.

157

Indian Health Service
Agency: Department of
Health and Human Services

Functional
Code: 551

Funding
CARTER BUDGET:
Budget Authority
Outlays
REESTIMATES & ADJUSTMENTS:
Budget Authority
Outlays
PROGRAM CHANGES:
Budget Authority
Outlays
REAGAN BUDGET:
Budget Authority
Outlays

Budget Reform
Criterion: 6
($ in millions)
1984
1983

1981

1982

715
688

772
740

801
766

-33
-3

-137
-53

682
686

635
687

1985

1986

831
786

863
817

897
850

-166
-68

-196
-165

-228
-196

-262
-229

635
688

635
621

Program Description
The Indian Health Service provides preventive, curative and environmental health services and
facilities construction for approximately 795,000 American Indians and Alaska Natives living on or
near reservations. The Carter budget provided 1982 construction funds for 3 clinics and 3 hospitals
added by Congress to the 1981 appropriation and a $23 million 1981 supplemental request for
sanitation facilities construction.

Proposed Change
Funds for facilities construction are reduced by $32 million in 1981 and $109 million in 1982 by
eliminating additional requests for sanitation facilities construction and seeking rescission of funds for
the new hospitals and clinics added by Congress. Funds requested for health services in 1982 are $20
million greater than 1981 but $28 million less than in the Carter budget. Urban health projects and
Indian health manpower scholarships would be phased out.

Rationale
By slowing construction of health facilities, this proposal would impose needed fiscal restraint for this
program. In recent years, facilities construction for Indians has proceeded at a high rate; since 1978, 9
other hospitals and 6 other clinics have been funded.
As part of the slowdown in construction, no additional funds are requested for HUD Indian housing
construction.

Key Facts About the Program
•

Funds not requested for new facilities were similarly opposed by the Carter Administration.

•

Urban health projects largely provide referral, rather than medical, services; are nojt required
by treaty obligation; and are over and above services available to the general population.

•

Indian manpower projects would be eligible for funding on their merits from $120 million of
1982 funding provided for all health professions training programs.

•

Despite these restraints, outlays from all Federal Indian programs will average more than
$12,000 for each Indian family of 4 in 1982.

158

Increasing the Cost-Effectiveness of the Medicaid Program
Agency: Department of
Health and Human Services

Functional
Code: 551

Funding
1981
CARTER BUDGET:
Budget Authority
Outlays
REESTIMATES & ADJUSTMENTS:
Budget Authority
Outlays
PROGRAM CHANGES:
Budget Authority
Outlays
REAGAN BUDGET:
Budget Authority
Outlays

1982

Budget Reform
Criterion: 1
($ in millions)
1984
1983

1985

1986

17,236
16,452

18,802
18,120

21,699
21,027

24,933
24,178

28,421
27,565

32,311
31,346

-1
-1

34
29

-416
-245

-1,185
-925

-2,350
-2,007

-3,844
-3,437

-589
-339

-1254
-944

-2,567
-2,325

-3,939
-3,652

-5,144
-4,878

-6,526
-6,196

16.646
16,112

17,582
17,205

18,716
18,457

19,809
19,601

20,927
20,680

21,941
21,713

Program Description
Medicaid is a program of grants to States to assist them in providing medical insurance coverage to
low income families and individuals. The Federal government provides States with open-ended
matching payments for their expenditures, with the Federal match (based on State per capita income)
ranging from 50% to 78%.
The Carter budget included a mix of minor savings proposals and benefit expansions* with a net
impact of -$95 million from current services in 1982. By 1986, Carter budget legislative proposals
would have added $1.1 billion to current services.

Proposed Change
Legislation will be requested to impose an interim limitation on currently open-ended Federal
matching payments for Medicaid while fundamental program reforms are developed. Federal
payments would be reduced $100 million below current projections in 1981, would be limited to a 5%
increase in 1982, and would be limited to the percentage increase in the G N P deflator in subsequent
years. During the interim period, States would be given additional flexibility to manage and structure
the program. The limitation would be allocated so that States would retain their current relative share
of total Federal Medicaid spending.
In addition, the new budget does not endorse benefit expansions included in the Carter budget and
proposes immediate recovery of Federal matching payments to States for previously disallowed
erroneous expenditures. The latter change is estimated in the Reagan budget to result in a one-time
1981 saving of $270 million. Currently, it takes up to eighteen months to recover such disallowances.

Rationale
As health care costs have risen dramatically over die last 15 years, the cost of maintaining health care
entitlement benflts has escalated alarmingly. Costs under federally supported medical assistance
programs for the needy have risen from $5.2 billion in 1970 to over $29 billion in this fiscal year.
Combined Federal and State expenditures for Medicaid; now exceed $1,300 for each eligible
beneficiary.
Federal and State regulatory efforts to date have failed to stem the increase in costs because they fail
to affect the underlying cost-increasing bias in the health care system that results from the insulation
of all parties in medical care markets from the cost consequences of their decisions. The
Administration will propose comprehensive legislation to remedy these market distortions.
As an interim measure prior to the adoption of these Administration initiatives, the Administration
will propose legislation to establish a limit on the Medicaid program's unconstrained growth. As part
of this proposal, Federal program requirements would be modified to allow States to amend their
present programs to ensure that essential services are provided to needy persons in a timely and
cost-effective manner.

159

The Medicaid program has been growing faster than 15% per year for the last 5 years. High Federal
matching, excessive benefit provisions, and overly-generous eligibility have made the Medicaid
program a very poorly managed social program that fails to provide cost-effective services to those
most in need.
Because under the interim cap Federal expenditures would no longer be open-ended, States would
have additional incentives to reduce fraud, waste, and abuse in this State-administered program. In
addition, the new flexibility granted States would enable them to reorganize their programs to deliver
care more effectively and at lower cost.
The Administration believes the degree of restraint provided by the interim limit can be achieved by
States without reducing basic services for the most needy. In the 1983-1986 period, the Administration
expects to institute comprehensive health financing and Medicaid reforms to reduce the rate of health
cost inflation and to improve Medicaid.
Under the Administration proposal, States would not be forced to shoulder unreasonable additional
burdens. Legislative changes would be sought to ensure that States have the flexibility to amend
quickly the eligibility, benefits, and payment provisions of their State Medicaid plans so as to allow
diem to meet the essential health care needs of their needy citizens at a lower cost. Under current law,
excessive Federal mandates are an obstacle to cost control. The Administration proposal would ensure
that States had the authority to reorient their program quickly toward essential services to those most
in need. No State, however, would be prevented from providing whatever additional services it
deemed appropriate out of its own resources.

Key Facts About the Program
•

Eligibility errors by the States are currently estimated to cost Federal and State governments
approximately $1.2 billion annually.

•

The previous Administration's HEW Inspector General's first anfiual report (1977) estimated
$4.1-$4.6 billion worth of waste, fraud and abuse in the Medicaid program.

•

The proposed 1982 reduction is only 3% of anticipated Federal-State program expenditures.

•

States vary widely in their control over annual expenditure growth. In November, 1980, the
five States with the slowest growing programs projected their expenditures would only
increase 2.3% in 1981, while the top five States projected a 32.2% average growth.

•

States vary widely in expenditures per beneficiary. In 1980, the five highest expense States
averaged an estimated $1,877 per beneficiary, compared to $712 in Federal-State
expenditures in the five lowest expense States.

160

National Center for Health Care Technology
Agency: Department of
Health and Human Services

Functional
Code: 553

Budget Reform
Criterion: 6

Funding
1981
CARTER BUDGET:
Budget Authority
Outlays
REESTEV1ATES & ADJUSTMENTS:
Budget Authority
Outlays
PROGRAM CHANGES:
Budget Authority
Outlays
REAGAN BUDGET:
Budget Authority
Outlays

1982

($ in millions)
1984
1983

1985

1986

4
3

6
5

6
6

—

—6

~~6

—6

-5

-6

4
3

Program Description
The National Center for Health Care Technology (NCHCT) was created by statute in 1978. NCHCT
has focused on assessments of new and emerging health care technologies and on making Medicare
coverage recommendations to the Health Care Financing Administration (HCFA).

Proposed Change
The Administration proposes to eliminate NCHCT as a separate organization and to assign
responsibility for its functions, where appropriate, to other HHS activities.

Rationale
As part of President Reagan's plans to manage Federal funds more efficiently, the elimination of a
separate health care technology center is a good example of a way in which the Federal budget and
the level of Federal employment can be responsibly reduced. Rather than continuing to support an
ever expanding separate HHS technology center, this change eliminates an unnecessary Federal agency
whose functions can be carried out by other activities. Appropriate Federal actions in this area, such
as Medicare coverage issues or technology assessments, will be conducted by HCFA, the National
Center for Health Services Research (NCHSR), and the National Institutes of Health (NIH).

Key Facts About the Program
•

As administered by HHS, NCHCT grew from a funding level of $344 thousand in 1979 to
$6.2 million and 50 staff proposed in the 1982 Carter budget.

•

The work of NCHCT parallels closely similar functions carried out by HCFA, NCHSR, and
NIH.

3UH-211 0 - 8 1 - 6

161

National Health Service Corps (NHSC)
Agency: Department of
Health and Human Services

Functional
Code: 553

Funding
CARTER BUDGET:
Budget Authority
Outlays
REESTIMATES & ADUSTMENTS:
Budget Authority
Outlays
PROGRAM CHANGES:
Budget Authority
Outlays
REAGAN BUDGET:
Budget Authority
Outlays

Budget Reform
Criterion: 6
($ in millions)
1984
1983

1981

1982

171
147

193
187

224
206

-23
-6

-56
-38

148
141

137
149

1985

1986

258
231

295
264

335
300

-87
-100

-121
-110

-158
-130

-198
-150

137
106

137
121

137
134

137
150

Program Description
The National Health Service Corps (NHSC) provides federally employed physicians and other health
professionals to areas classified by the Department of Health and Human Sendees (HHS) as health
manpower shortage areas. Most of the NHSC recipients receive full tuition and stipend support while
in medical school for which they owe service on a year-for-year basis.

Proposed Change
As part of its efforts to reduce market distortions and Federal subsidies, the Administration proposes
no new scholarships for the NHSC program. This action is intended to prevent unnecessary program
growth and costs in the 1990's, when persons receiving new scholarships would complete their training
and report for assignment as Federal employees. This proposal would maintain a constant, long term
NHSC size of 2,500 assignees to be utilized only in the highest priority areas where physicians and
other needed health professionals are not likely to locate voluntarily or where scholarship obligated
health professionals could not choose the private practice option because the undersen'ed area could
not support a private practice. (The "private praction option" is available to assignees who wish to
enter a private practice in shortage areas in return for forgiveness of scholarship obligation.)

Rationale
Serious remaining problems of access to adequate primary care will probably be virtually eliminated
within the next few years due to growth in the Nation's supply of physicians and past NHSC
scholarship commitments. At most, 6,000 health professionals—to serve approximately 12 million
undersen'ed people—are necessary to cover all health manpower shortage areas. However, the NHSC
placement program alone, under Carter Administration placement policies, would have grown from
2,060 in 1980 to our 9,000 by 1990, even if new awards were frozen today. HHS, working with States,
local communities, and potential assignees, will make maximum use of the private practice option and
other non-Federal placement to assure that the maximum strength of the NHSC does not exceed
2,500 Federal employees. In addition, recent data indicate that physicians in general, and primary
care physicians in particular, are voluntarily locating in smaller communities, and that specialists in
rural areas spend 30% or more of their time on primary care. Finally, since the scholarship pipeline is
so long, whatever short-term problems in primary care access remain would not be addressed by new
awards.
In addition to the excess supply problem, total program costs for assignees obligated by scholarship
are very high.
Federal costs in 1980 averaged $100,000 per physician for each year of
scholarship-obligated service. Alternative aid programs would be more cost effective. Consequently,
the Administration proposes to eliminate all new NHSC scholarship awards in 1981 and 1982 but will
allow students who currently have scholarships to complete their training.

162

Key Facts About the Program
•

Physician supply expansion is so rapid—34% during the 1970s, and an estimate additional
38% during the 1980s—that a surplus of physicians is expected by 1990 for most medical
specialties.

•

Access to medical care has improved greatly since the early 1960's, so that even when data
are corrected for disability, the poor now see physicians at least as often as the non-poor.

163

Moderate Growth for the National Institutes of Health
Agency: Department of
Health and Human Services

Functional
Code: 552,553

Funding
1981
CARTER BUDGET:
Budget Authority
Outlays
REESTIMATES & ADJUSTMENTS:
Budget Authority
Outlays
PROGRAM CHANGES:
Budget Authority
Outlays
REAGAN BUDGET:
Budget Authority
Outlays

1982

Budget Reform
Criterion: 6
(S in millions)
1984
1983

1985

1986

3,594
3,410

3,849
3,655

3,968
3,750

4,099
3,875

4,236
3,999

4,381
4,130

-81
-36

-86
-73

-91
-83

-97
-92

-102
-98

-107
-103

3,512
3,374

3,762
3,583

3,877
3.667

4,002
3,783

4,135
3,901

4,274
4,027

Program Description
Reflecting the Administration's commitment to Federal support of essential biomedical research
activities, funding increases will be proposed for continued growth of the National Institutes of Health
(NIH). NIH provides support for biomedical research, primarily through NIH's eleven Institutes.
Research project grants, made mostly to individual researchers and research teams, account for
approximately one-half of NIH's budget. Other NIH funds support a variety of research and training
activities.

Proposed Change
Funding wil allow continuation of previous years' commitments and permit substantial numbers of
new awards each year. As part of a general effort to achieve economies and reduce lower priority
activities, however, the funding increases will not fully cover projected inflation.

Rationale
Despite these overall reductions, however, the Administration remains commited to NIH research
project grants as a vehicle for stimulating scientific breakthroughs that return benefits to society far in
excess of the Federal commitment of funds. One of the principal areas of reduction will be the
institutional payments made for Nrfi (and other) research training under the National Research
Service Awards (NRSA) program. This proposal would eliminate the current practice of paying more
to an institution for a federally supported trainee than is charged in tuition and fees to nonfederally
supported students at the same institution. All trainees would continue to receive awards for their
tuition, fees, and living expenses.

Key Facts About the Program
•

Increased funding from 1981 to 1982 will be provided for all Institutes.

•

The numbers of new and competing research project grants in 1981 and 1982 will exceed the
1980 level.

•

The number of training grants will also be at approximately the 1980 level.

164

Office on Smoking and Health
Agency: Department of
Health and Human Services

Budget Reform
Criterion: 6

Functional
Code: 553

Funding
1981
CARTER BUDGET:
Budget Authority
Outlays
REESTIMATES & ADJUSTMENTS:
Budget Authority
Outlays
PROGRAM CHANGES:
Budget Authority
Outlays
REAGAN BUDGET:
Budget Authority
Outlays

1982

($ in millions)
1984
1983

1985

1986

3
2

3
3

-1
-1

-3
-3

Funding will continue under a combined OASH health promotion and smoking and health activity, including $2.9 million and 25
positions in 1982. This represents a reduction of $3.9 million and 12 positions from the Carter budget. An additional $10 million
for smoking and health demonstration grants has been folded into the proposed health block grants.

Program Description
The HHS Office on Smoking and Health (OSH) was established in 1979 by former HEW Secretary
Califano as a separate office under the Office of the Assistant Secretary for Health (OASH). OSH
coordinates HHS' national smoking and health program, including providing technical assistance and
preparation of an annual report to Congress. Funding for this activity totalled $2.5 million in 1980
and $3 million in 1981. President Reagan has proposed a $1 million rescission in 1981 as part of plans
to eliminate a separate OSH by 1982.

Proposed Change
This change provides for eliminating a separate OSH activity and combining it with the OASH health
promotion activity. This combined activity will continue to assist Federal, State and local agencies and
private organizations to develop programs in nutrition, exercise, smoking, and alcohol and drug abuse.

Rationale
Consistent with other Administration efforts to eliminate unnecessary and duplicative Federal
activities, the elimination of a separate OSH terminates low priority activities that should more
appropriately be carried out at the State and local levels. The President's proposed health block grants
ensure that States will have the flexibility to fund smoking and health programs if they are considered
a high priority. Maintenance of a separate Federal smoking and health office will no longer be
necessary under these circumstances.

Key Facts About the Program
•

Since OSH's establishment, one of its major functions has been to coordinate smoking and
health activities carried out in several HHS activities, including NIH, CDC and ADAMHA.

•

As noted above, implementation of the health block grant proposals coupled with other
administrative improvements will enable the Administration to combine smoking and health
coordination with the OASH health promotion .program.

165

Professional Standards Review Organization (PSROs)
Agency: Department of
Health and Human Services

Functional
Code: 551

Funding
CARTER BUDGET:
Obligations
Outlays
REESTEVIATES & ADJUSTMENTS:
Obligations
Outlays
PROGRAM CHANGES:
Obligations
Outlays
REAGAN BUDGET:
Obligations
Outlays

Budget Reform
Criterion: 6
($ in millions)
1984
1983

1981

1982

174
171

-38
-38

-104
-102

-107
-106

135
133

70
68

67
65

1985

1986

174
171

-174
-171

Program Description
This program—administered through 185 Federally funded PSROs of widely differing effectivenessis intended to assure the necessity and quality of medical care funded through Medicaid and
Medicare. The Carter budget provided a new requirement that the PSRO program have as a national
objective for 1982 a 2% reduction in Medicare and Medicaid days of hospital care.

Proposed Change
A competitive system of funding would be introduced by which only those PSROs judged most
effective in reducing medical costs and improving quality of care would be refunded. No Federal
objective setting would be required and the mandate for utilization review where PSROs are not
active would be removed. After 1983, Federal support for PSROs would stop.

Rationale
The phase-out of the PSRO program would substantially reduce Federal regulation of health care
services. By defimding the least effective PSROs, this proposal would also impose needed fiscal
restraint Recent studies on the effects of the PSRO program by the Congressional Budget Office
provide evidence that the PSRO program raises national health care spending. According to these
studies, the cost of the nationwide system of hospital utilization review organizations exceeds the
resulting savings achieved by reductions in length of hospital stay and lower admission rates. Even this
analysis fails to factor in the reality that, due to the way in which hospitals are presently reimbursed
for services on a cost basis, cost "savings" achieved through lower medicare and medicaid utilization
are simply passed on to hospital users who pay their own bills, or who are covered by private
insurance. The phase-out of the PSRO program over the 1981-1983 period is consistent with a 2-year
Administration timetable to develop health financing reforms that encourage competition in the health sector. The transitional funding for the most effective PSROs would be continued into 1983 to allow
competing systems of care to contract for their services.

Key Facts About the Program
•

The Congressional Budget Office estimates the PSRO program results in a net loss of $0.60
for every dollar spent.

•

Some PSROs appear to be effective; 50 receive funding from industry or insurance carriers
to cover non-Federal patients.

•

The American Medical Association and American Hospital Association recently called for the
abolition of the PSRO program.

166

Public Health Service Hospitals and Clinics
Agency: Department of
Health and Human Services

Functional
Code: 551

Funding
1981
CARTER BUDGET:
168
Budget Authority
Outlays
168
REESTIMATES & ADJUSTMENTS:
Budget Authority
Outlays
PROGRAM CHANGES:
Budget Authority
-39
-39
Outlays
REAGAN BUDGET:
Budget Authority
129
129
Outlays
This level would continue to support the National Center

1982

Budget Reform
Criterion: 6
($ in millions)
1984
1983

1985

1986

172
172

160
160

170
170

-99
-99

-150
-150

-160
-160

10 17
73
10 17
10 17
1017
17
17
17
73
10
10
10
1017
for Hansen's Disease and the Tuskeegee syphilis study.

Program Description
The Public Health Service (PHS) has operated a wholly federally financed medical care system for
merchant seamen since 1798. The original purpose of the entitlement was to protect the Nation from
communicable diseases that could be brought into the country from foreign ports at a time when
there were few medical facilities in American port cities. Today, those cities have sufficient medical
facilities. Moreover, through'the years, this entitlement has been expanded from merchant seamen to
include tugboat operators, fishermen, offshore drilling crewmen, dredge industry employees, and
others in addition to oceangoing seamen. Thus, a program that was originally designed to provide
occasional onshore benefits for seamen who spent most of their days at sea has become, in effect, a
free Government health delivery program for selected occupational classes.

Proposed Change
The Administration will seek repeal of this entitlement and closure of the remaining eight PHS
hospitals and 27 clinics now providing free medical care. This change requires a 1981 rescission of $39
million and a 1982 reduction to the Carter budget of $99 million.

Rationale
The provision of free Government health care for merchant seamen is unnecessary and unwarranted.
Moreover, the PHS hospital and clinic system is under-used and actually aggravates health care costs
in the cities where the hospitals are located. Improved health and the growth of collectively bargained
health care plans have led to low demands on the PHS hospital system. Occupancy rates of the
hospitals have averaged about 65% since 1976, compared to national minimum standards of 80%
occupancy. In addition, all of the hospitals are located in areas with adequate or excess supply of
hospital beds, and all of the eight affected cities have at least one other Federal facility operating at
less than 80% occupancy to care for nonmerchant seamen patients entitled to Federal care. Thus, this
proposal will not affect appreciably merchant seamen's access to care.
Most of the hospitals and clinics have also been serving a small number of low-income people in their
areas, largely on an outpatient basis, in order to fill unused cpacity. This proposal includes funds to
allow the Department of Health and Human Services to pay for such services by contract in 1982
while seeking arrangements for indigent care with other under-utilized hospitals in affected areas.
Under this schedule, PHHS operational support of the hospitals and clinics would cease as of October
1 of this year. The entire system would either be closed or turned over to local communities that wish
to maintain the facilities by the end of 1982.

167

Key Facts About the Program
•

Seamen union members earn between $12,000 per year to $79,000 per year and have medical
coverage through noncontributory employer financed health insurance plans.

•

Over 70% of the PHS system employees are physicians, dentists, nurses, and skilled
technicians who would not be expected to face great difficulty in obtaining other
employment in the rapidly growing medical care industry.

•

The Federal Government will provide $415 million in subsidies to the American shipping
industry in the 1982 budget.

168

PHS Commissioned Corps Physician Bonuses
Agency: Department of
Health and Human Services

Functional
Code: 553

Funding
CARTER BUDGET:
Budget Authority
Outlays
REESTIMATES & ADJUSTMENTS:
Budget Authority
Outlays
PROGRAM CHANGES:
Budget Authority
Outlays
REAGAN BUDGET:
Budget Authority
Outlays

Budget Reform
Criterion: 2
(S in millions)
1984
1983

1981

1982

44
44

48
48

52
52

56
56

60
60

64
64

-3
-3

45
45

49
49

53
53

57
57

61
61

44
44

1985

1986

Program Description
Under an amendment to the Mental Health Systems Act (MHSA) (P.L. 96-398), the 2,700 PHS
Commissioned Corps physicians are authorized the same bonus levels as military physicians —a
potential annual maximum of $29,500 above basic salary. The MHSA amendment changed a
significant' feature in the Uniformed Services Health Professionals Special Pay Act of 1980 (P.L.
96-284) that increased military physician bonuses but held the Commissioned Corps to its existing
bonus levels—a potential annual maximum of $25,700 above basic salary. The MHSA amendment was
enacted despite objections from the previous administration which had earlier vetoed such increases.

Proposed Change
This change would modify the MHSA amendment that tied the bonuses paid to Commissioned Corps
physicians to the level paid to the military and allow PHS physician bonuses to be related to HHS
needs.

Rationale
The argument that both the military and the Commissioned Corps should receive the same pay and
benefits because both are "uniformed" services is not valid. While it has been a uniformed service, the
Commissioned Corps has functioned very differently from the military health corps. Corps members
receive the same benefits as the military—free retirement and medical care, commissary and PX
privileges, etc., without comparable hardships and rotational assignments, and without being subject to
the Uniformed Code, of Military Justice. As part of President Reagan's plan to reduce middle and
upper income benefits, the continuation of entitlement bonuses to Commissioned Corps physicians at
the same level and on the same basis as the military is unwarranted.
Moreover, there is no difference in function between Corps and General Schedule (GS) health
personnel to justify additional benefits. Corps members are paid substantially more for doing the same
job than GS employees—$10,000-$15,000 more annually for senior Corps physicians. Many
Commissioned Corps physicans do not practice medicine—rather, they function as researchers,
administrators, or health planners.
With the proposals in President Reagan's 1982 Budget to eliminate inappropriate Federal activities,
e.g., closing the PHS hospitals, an estimated 500 Commissioned Corps physicians can contractually be
reassigned to meet any documented PHS physician shortages. Thus, as with proposed changes for VA
physician bonuses, it is unnecessary to maintain artificially high bonus levels for Commissioned Corps
physicians. Rather, bonus levels will be tailored to the needs of each physician personnel system.

Key Facts About the Program
•

The Administration will develop further reforms of the Commissioned Corps system so that
it better meets HHS, rather than DOD, recruitment/retention needs and is better integrated
with the HHS GS physician payment system.
169

Refugee Assistance
Agency: Department of
Health and Human Services

Functional
Code: 609

Funding
CARTER BUDGET: 17
Budget Authority
Outlays
REESTLMATES & ADJUSTMENTS*
Budget Authority
Outlays
PROGRAM CHANGES:
Budget Authority
Outlays
REAGAN BUDGET:
Budget Authority
Outlays

Budget Reform
Criterion: 6
(% in millions)
1984
1983

1981

1982

690
579

652
658

600
678

-50
—31

-21
-13

-6

48
-41
583
604

640
548

1985

1986

494
581

335
485

304
389

-57
-47

-24
-39

-14
-22

-14
-15

543
625

470
542

321
463

290
374

56
62

48
48

The Carter budget already included savings for this proposal. Total savings expected are as follows:
124
112
Budget Authority
73
84
Outlays
88
103

Program Description
The Refugee Assistance program reimburses States for cash, medical assistance, and social services to
refugees for up to three years after their arrival in the U.S. Up to 50% of the 181,000 refugees arriving
in the U.S. during fiscal year 1981 may require public assistance. The voluntary agency grant program
provides a $1,000 matching per capita grant for Soviet Jewish refugee resettlement social sendees in
the U.S. The Cuban program phasedown gradually decreases the reimbursement to States (60% in
FY 81, 45% in FY 82 and 25% in FY 83) for costs in providing senices and benefits to "old" Cubans
who arrived in 1962-78.

Proposed Change
•

Rescind $30.4 million in 1981 for cash and medical assistance, and for voluntary agency
grant programs, due to a decrease in the number of refugees (mainly Soviet and Indochinese)
arriving in the U.S. in the first quarter of FY 81.

•

Rescind $15 million in 1981 for "old" Cuban program phasedown for cash and medical
assistance, and for reimbursement to states for sendees to Asylum Applicants, due to lower
State cost estimates than projected earlier.

•

Rescind $4.5 million in the 1981 Refugee Assistance budget for non-essential non-State
administered social service projects and Federal Administration.

•

Reduce the level of refugee benefits starting in 1982 to a level comparable to those given to
the general population.

Rationale
Because of lower refugee flows, as displayed below, $30.4 million less will be needed in the state
administered cash and medical assistance programs, and in the voluntary agency' grants for
resettlement social senices.
1st Quarter
Projected
Soviet Jewish
Indochinese

1st Quarter
Actual

6,000
42,000

2,198
32,777

Decrease
in Flow
-3,802
-9,223

%
Decrease
64%
22%

Eliminating the 20 year Cuban program in 1982 makes our refugee policy more consistent with the
Refugee Act of 1980, which allows only 3 years of special Federal reimbursment. The old Cuban
program is no longer needed as the average annual income of the old Cuban refugee families equals

170

96% of the average annual U.S. family income. A different program provides services to Cubans and
Haitians arriving after 1978.
The proposed cash assistance changes makes the refugee assistance program more comparable to the
AFDC program, and general assistance programs. TTiis will eliminate the higher than normal U.S.
public assistance program benefits paid in the refugee program.

Key Facts
•

For services and assistance costs to the 125,000 Cubans and Haitians who arrived in Florida
during the summer of 1980, states and localities have been reimbursed with Federal ftmds
authorized by the Refugee Educational Assistance Act of 1980 (P.L. 96-422). This Act (also
known as Fascell-Stone) provides up to $100 million in reimbursements to States and
localities for services to Cuban and Haitians entrants for FY 82..

•

The Federal Government reimburses States at the rate of 100% for services and assistance to
refugees for up to three years.

•

Voluntary agencies receive a $350 per capita grant for initial reception and placement
services in addition to the $1000 resettlement social services grant for each Soviet Jewish
refugee resettled in the U.S. Soivet Jewish refugees are entitled to all refugee benefits under
the Refugee Act of 1980.

171

Social Security Overview
Funding
1982

1983

in millions)
1984

132,672
139,884

152,318
161,551

168,554
183,078

185,052
203,705

210,803
224,196

233,916
244,638

+ 1,379
-294

+ 649
-2,024

+ 1,765
-6,741

+ 2,256
-11,882

+ 2,130
-17,172

+ 2,680
-22,897

-35

-1,030
(+30)

-1,675
(+50)

-2,075
(+75)

-2,225
(+100)

-2,350
(+100)

-60

-1,300

-1,400

-1,500

-150

-175

-200

-50
-5

-200
-50

-500
-75

-700
-100

-900
-125

-1,100
-150

-5

-120

-350

-630

-950

-1,220

134,051
139,435

152,967
156,677

170,319
172,162

187,308
186,618

212,933
201,124

236,596
215,221

1981
CARTER BUDGET:
Budget Authority
Outlays
REESTIMATES & ADJUSTMENTS: 17
Budget Authority
Outlays
PROGRAM CHANGES:
Adult Student Payments:
Outlays
(Student Assist Offset)
Minimum Payment
Amount:'^
Outlays
Payments on a Worker's Death:
Outlays
Disability Insurance:
Improve Administration Outlays
Institute a Megacap Outlays
Tighten recency-of-work
(6 out of 13 quarters)
Outlays
REAGAN BUDGET:
Budget Authority
Outlays
17

1985

1986

Includes effects of student assistance (Pell Grant) offset.
Offsetting increases in other Federal programs associated with this proposal are not included above.

Social Security: Adult Student Payments
Agency: Department of
Health and Human Services

Functional
Code: 601

Budget Reform
Criterion: 1

Program Description
Full time adult students age 18-21 get social security payments as dependents of retired, disabled or
deceased workers. Aproximately 800,000 adult students now receive these payments. The average adult
student payment is $255 per month and ranges from a low of $20 to a high of $700..

Proposed Change
Adult student payments would be eliminated. No new adult students would receive payments and
existing student payments would be reduced by 25 percent each year over the next three years. Social
security revenues would be more fully dedicated to basic benefits.

Rationale
•

The benefit is inappropriate — social security protects against loss in income from risks (old
age, disability and death) which are beyond the worker's control. Continuing the adult
student payment past age 18 because adult students choose to go to school should not be an
insurable risk.

•

The payment is poorly designed as educational assistance — The payment amount is
unrelated to the student's educational costs, proficiency in school, or ability to meet
educational expenses.

•

Educational assistance is granted more equitably and efficiently under other Federal
programs — Financial aid for adult students from Federally insured student loans, national
defense student loans, and basic educational opportunity grants would be increased for those
needing assistance to offset the elimination of social security payments.

•

Social security can no longer afford this drain — The present financial condition of social
security was not anticipated when the student payment was introduced in 1965. The adult
student payment departs from the basic purpose of social security. They should be eliminated
particularly when trust funds are not adequate to assure basic benefits.

•

Program participation rates and costs have exploded since 1965 — In the past ten years, the
cost to social security of adult student payments have more than quadrupled. During that
time, the number of student recipients increased only one-third. This occurred during a
massive build-up in direct Federal student assistance.

Key Facts About the Program
The Federal Government invests heavily in post-secondary students, in recognition of the vital
importance of education. Excluding social "security, Federal assistance to post-secondary students
multiplied 25 times since 1965, growing from less than $.3 billion in 1965 to $7.5 billion in 1982.
At the same time, payments to adult students from the social security trust funds were also rapidly
increasing, from $.2 billion in 1965 to $.5 billion in 1972 to $2.2 billion in 1982.
Unlike other Federal aid to students, adult .student payments in social security are unrelated to
educational cost, need, or family income. These payments have become a sizable drain on the social
security trust funds, which can simply no longer afford the more than $2 billion annual cost for these
low-priority payments. Other, better targeted, federal educational assistance programs provide for
those students needing aid.
($ in billions)
1965'
1972
1982
OASDI Balances (end-of-year)
22.2
43.8
20.3
OASDI Outlays
17.5
40.2
157.7
OASDI Reserves (Balance/Outlays)
127%
109%
13%

173

Social Security: Disability Insurance
Agency: Department of
Health and Human Services

Functional
Code: 601

Budget Reform
Criterion: 1

Program Description
Disability insurance (DI) benefits replace worker's earnings (due to their inability to work) for the
worker and the family. Both GAO and Social Security Administration studies show that hundreds of
thousands of current recipients are not currently disabled but still receive payments. Benefits larger
than a disabled worker's prior earnings may induce some individuals to apply for or remain on the DI
rolls even though they could work and support themselves. Disability benefits also go to people who,
not having been in social security covered work in the past 5 years, lack a reasonable basis to claim
social security disability insurance payments. DI caseloads have risen by 80% since 1970, and costs
have climbed by 500%.

Proposed Change
The Social Security Administration will be intensively reviewing cases to insure that only the truly
disabled receive disability benefits. To remove the work disincentive caused by excessive benefit
levels, a "megacap" will be established to ensure that disability income from all public sources never
exceeds the worker's prior after tax earnings, adjusted for inflation. Legislation will also more closely
focus eligibility for DI on those individuals who have recently worked in social security covered jobs
before becoming disabled.

Rationale
The purpose of DI is to provide for workers and their families when a worker can no longer work.
Payments should not go to people who are not disabled.
•

Intensified reviews of new applicants and current recipients will weed out the 500,000 people
receiving payments whom GAO says are not disabled, saving the trust fund hundreds of
millions of dollars in mispent payments.

•

Other weaknesses in the administration of DI, documented by GAO over the past 4 years,
will be corrected by HHS.

Originally, to be eligible for DI, applicants must have worked for at least 6 of the previous 13
calendar quarters. This would relate their loss of earning due to disability to recent social security
covered employent. The test was subsequently liberalized, when DI costs were quite low, so that
individuals who did not depend on social security covered jobs — perhaps had not even worked in
the past 5 years — could qualify for payments.
•

Reinstituting the "recency of work" test would more closely link benefits to the replacement
of lost (covered) earnings, the original purpose of DI.

•

Benefits would be better targeted on individuals whose livelihood came from social security
covered employment, while screening out wasteful payments to those with little social
security covered work.

•

The Supplemental Security income program is the proper "safety net" for the truly needy
disabled without recent work experience.

The "megacap" proposal would limit public disability benefits so that they do not exceed a worker's
prior after-tax earned income about (80% of earnings), adjusted for inflation. This would avoid:
•

Individuals receiving more while disabled than they were paid for working.

•

Continuing overly-generous benefits from uncoordinated, multiple sources which offer a
perverse incentive, inducing people not to work.

174

Key Facts About the Program
The costs of disability insurance have grown by leaps and bounds, as shown below:
Number of
Disabled Workers
Receiving Benefits
1965
1970
1975
1981
1985

988,074
1,492,948
2,488.774
2,869,000
2,991,000

Annual Benefits
($ millions)
1,159
2,352
6,747
16.978
24,000

Average
Monthly
Benefits
98
131
226
410
655

•

"As a result of SSA's [previous] ... poor management... as many as 584,000 beneficiaries who
do not currently meet SSA's eligibility criteria may be receiving disability benefits. These
beneficiaries represent over $2 billion annually in Trust Fund c.osts. ... substantial savings
could be achieved if SSA focused on this problem." (HRD 81-48, March 3, 1981)

•

SSA "has no means of measuring program efficiency" and "does not know how often
[disability was determined based on]...medical examinations which were too comprehensive or
were inadequate." (HRD 79-119, October 9, 1979)

•

"The disability claims process needs to be more effectively managed by the Social Security
Administration. Weaknesses in the disability claims proccess cause lengthy delays
...and...overexpenditures". (HRD 78-40, February 16, 1978)

175

Social Security: Minimum Payment Amount
Agency: Department of
Health and Human Services

Functional
Code: 601

Budget Reform
Criterion: 1

Program Description
A minimum initial payment of $122 per month is given to social security recipients who, under the
normal benefit formula, earned a lesser amount. Once on the rolls, the $122 minimum payment
amount is increased by the CPI.

Proposed Change
Pay social security recipients only their "earned" benefits, no longer giving an artificial minimum
amount above their earned benefits.

Rationale
Both GAO and various Social Security Advisory Councils concluded that the minimum benefit has
outlived its usefulness and generates undersirable windfalls to workers with substantial employment
not covered by social security. First enacted in 1939 at a $10 per month level before social security
expanded to cover more than 9 out of 10 workers, the original purpose was to raise retirement income
for those with very low wage histories, as well as those who worked in jobs before social security
extended to their work.
Suppplemental Security Income (SSI), with benefits about double the social security minimum, better
fulfills the social objective underlying the minimum. SSI provides a safety net for those in need
without diverting over $1 billion annually from basic social security. The social security trust funds
can no longer afford these low-priority payments.

Key Facts About the Program
•

Since 1974, SSI has given cash assistance to the needy aged, blind, and disabled. For these
individuals, the minimum payment merely offsets, dollar for dollar, the amount of SSI
assistance they would otherwise receive.

•

Only 17% (500,000) of minimum payment recipients are truly needy (on SSI). They would
not experience any reduction in Federal payments.

GAO found that for 74% of minimum payment recipients, social security is not the primary
income source, and that they receive unintended windfalls beyond their modest social
security contributions.
Of the 3 million minimum payment recipients, 1.7 million would not have their income reduced by
eliminating minimum payments.
•

•

1.2 million would have offsetting increases in their OASDI benefits (i.e., derivative benefits
to spouses, survivors, etc.).

•
500,000 minimum recipients would have offsetting increases in their SSI benefits.
GAO data show that at least 800,000 minimum recipients do not depend primarily on their social
security payments.
•

450,000 (or 15% of minimum recipients) receive Federal pensions averaging over $900 per
month.

•

350,000 (or 12% of minimum recipients) have working spouses whose earnings average over
$14,000 annually.
For the remaining 500,000 minimum recipients, GAO data suggest that a significant number would
have public pensions from State or local governments or "other" income.

176

Social Security: Payments On A Worker's Death
Agency: Department of
Health and Human Services

Functional
Code: 601

Budget Reform
Criterion: 1

Program Description
Lump sum death payments of $255 are made when an insured worker dies regardless of whether
there are surviving family members. The payment is made regardless of income, need, or the size of
an estate. Typically, payments go directly to funeral home operators.

Proposed Change
Continue the lump sum death payment only for deceased workers when a surviving spouse or minor
children are receiving survivors benefits. Eliminate the burial payment where no survivors benefits are
payable. This payment would not go to funeral homes, estates, grown surviving children, or non-aged
spouses who are not eligible for survivors benefits (i.e. who have no minor children in their care).

Rationale
The original intent of the worker's death payment was not only to help meet expenses for the last
illness and burial of a deceased worker, but also to insure that the "return" on social security to a
worker (or his estate) exceeded his social security taxes.
•

Except for early deaths of beneficiaries without survivors, in virtually all cases social security
retirement benefit payments now exceed a worker's social security taxes.

•

The lump sum death payment is a maximum of $255; it would not generally cover full
burial costs.

The cost of administering these small payments is 5 times higher than handling basic social security
benefits. This proposal would not affect widows and orphans who would receive survivors benefits.

Key Facts About the Program
Almost half of current payments go to estates with no surviving spouse or surviving minor children.
The payment is unrelated to social insurance, prior social security contributions, or benefits.
•

The payment has remained frozen since 1954 because of its marginal relation to basic social
security.

•

Eliminating these payments to estates would better protect orphans and widows because
social security's solvency would be improved.

177

Supplemental Security Income
Agency: Department of
Health and Human Services

Functional
Code: 609

Funding
1981
CARTER BUDGET:
Budget Authority
Outlays
REESTIMATES & ADJUSTMENTS*
Budget Authority
Outlays
PROGRAM CHANGES:
Budget Authority
Outlays
REAGAN BUDGET:
Budget Authority
Outlays

1982

Budget Reform
Criterion: 1
(S in millions)
1984
1983

1985

1986

7.278
7,305

7.938
7,972

9,443
9,453

8,704
8,675

10.194
10,186

10,926
10,926

-35
-35

153
140

29
28

518
141

-196
-193

-433
-432

-110
-110

7,981
8,002

9.362
9,371

9.112
8,706

9.888
9,883

10,383
10,376

—
—

7,243
7,270

Effect of outlay reestimates, revised economic assumptions, and offsetting increase associated with proposed QASDI reductions.

Program Description
Supplemental Security Income (SSI) pays the needy elderly, blind and disabled based on their income
with a minimum indexed guarantee of $238 a month for an individual and $357 a month for a couple.

Proposed Change
•

Initiate retrospective accounting rather than prospective quarterly budgeting. Thus, instead of
projecting income of recipients forward for 90 days, the actual income received over the
prior period would be used to determine the Federal benefit payment. (-$60 million
annually).

•

Verify interest and divided income through IRS records and tighten SSI regulations
conerning the exclusion of irregular income. (-$50 million annually).

Rationale
GAO report HRD 81-37 has recommended that retrospective accounting be used. Such a procedure
reduces errors by relying on actual rather than estimated data. It is used in income tested (AFDC and
Medicaid) programs by 12 States and is a federally authorized option in the Food Stamp program. A
similar change is being sought in AFDC and Food Stamps.
Verifying interest and dividend income was recommended by GAO Report HRD 81-4 (February 4,
1981). This could be done at little cost through computer tape matching.

Key Facts About the Program
•

By cross-checking records with the Veterans Administration, the Railroad Retirement Board,
and the Civil Service retirement benefits system, the Social Security Administration was able
to save $61 million in SSI overpayments annually. Similar cross-checking is proposed for
IRS.

178

Department of Housing and Urban Development

179

Administrative Expenses
Agency: Department of Housing
and Urban Development

Functional
Code: 999

Funding
CARTER BUDGET:
Budget Authority
Outlays
REESTEVIATES & ADJUSTMENTS:
Budget Authority
Outlays
PROGRAM CHANGES:
Budget Authority
Outlays
REAGAN BUDGET:
Budget Authority
Outlays

Budget Reform
Criterion: 8
(S in millions)
1984
1983

1981

1982

338
332

356
356

355
355

-4
-4

-19
-18

334
328

337
338

1985

1986

355
355

-18

337
337

Program Description
Administrative expenses are chiefly included in two accounts, the Working Capital Fund and Salaries
and Expenses. The Working Capital Fund is a revolving fund sustained through reimbursements for
services provided. Salaries and Expenses, on the other hand, receives funding from three sources:
budget authority (as is included in the above table), transfers from the Federal Housing
Administration, and other, smaller transfers.

Proposed Change
This proposed change would reduce administration expenses commensurate with the proposed
reduction in staffing. The proposed staffing reductions reflect both savings from proposed program
reductions or eliminations and more effective use of Federal staff resources. The following tables
highlight the differences between the Carter and Reagan Budgets for 1981 and 1982. (Unlike the
earlier table, the table below reflects all expenses, whether derived from budget authority, FHA
transfers, or other transfers.)
Administrative Expenses
1982
1981
Carter
Reagan
Change
Carter
Reagan
Change
442
461
458
471
-29
Personnel Compensation
-4
-2
23
20
-2
20
18
Travel
154
-4
Other Expenses
139
136
-3
158
621
612
TOTAL
-9
651
616
-36
Employment
1982
1981
Carter
Reagan
Carter
Reagan
Change
Change
End-of-year
16.462
15,561
-901
16,762
15,295
-1,467
Full Time Equivalents
16,493
16,188
-305
16,793
15,703
-1,090

Rationale
•

Reduce overhead and personnel costs of the Federal Government.
reductions result from proposed program reductions.

181

Most of these staffing

Community Development Block Grants
and Urban Development Action Grants
Agency: Department of Housing
and Urban Development

Functional
Code: 451

Funding
1981
CARTER BUDGET:
Budget Authority
Outlays
REESTLMATES & ADJUSTMENTS:
Budget Authority
Outlays
PROGRAM CHANGES.1/
Budget Authority
Outlays
REAGAN BUDGET:
Budget Authority
Outlays
1/

4370
4303

Budget Reform
Criterion:
4

1982

(S in millions)
1984
1983

4635
4608

4785
4451

-469
+5

-619
-104

4166
4613

4166
4347

The Carter Budget already included savings for this proposal. Total savings
1981
1982
Budget Authority
-584
Outlays
-17

4935
4679

1985
5085
4838

1986
5235
4988

[undetermined]
[undetermined]
[such sums as may be necessary]
[such sums as may be necessary]

expected are as follows:
1983
1984
1985
-931
[undetermined]
-187
[undetermined]

1986

Program Description
The Community Development Block Grant program provides grants to units of local government for
general community development, principally for the benefit of lower income persons. Entitlement
grants, allocated by formula, go to large cities and urban counties. Discretionary grants, allocated by
State-wide competitions, go to small cities. The Secretary's Discretionary Fund provides discretionary
grants to recipients and projects which would otherwise probably not receive assistance from this
program. In 1981, about 2,850 localities will receive assistance.
The Urban Development Action Grant program provides discretionary grants, allocated by national
competition, to units of local government to be used in conjunction with private and other public
funds in order to promote economic development in distressed areas. In 1981, an estimated 350 grant
awards will be announced. Some cities, as in the past, will receive multiple awards.

Proposed Change
Beginning in 1982, the Reagan Administration will propose to combine these two programs into a
more efficient and effective instrument for the Federal support of locally determined community and
economic development activities. In this new program federally imposed requirements will be
lessened, Federal intervention in local decision-making will be reduced, eligible activities will be
expanded (to include economic development activities in conjunction with for-profit enterprises as
now undertaken by UDAG so that private funds can be levenaged), and local flexibility and
decision-making will be increased.

Rationale
•

The consolidation of categorical grant programs into block grants.

•

The return of decision-making and implementation powers to local and State governments.

•

A lessening of Federal intervention in local community and economic development.

Key Facts About the Program
The 1981 CDBG program:
•

Entitlement grants will go to about 650 large cities and urban counties; average grant is
about $4.1 million.

182

•

Discretionary grants will go to over 2,000 smaller cities with funding decisions largely made
by HUD area offices; average grant is about $0.5 million. Unneeded Federal involvement

•

Other discretionary grants will be made for specific projects or to specific recipients with
funding decisions largely made by HUD headquarters.
Estimated 1981 Distribution of Funds
(dollars in millions)
Large Cities/Urban Counties
Discretionary, Small Cities
Secretary's Discretionary Fund
TOTAL

$2,653
938
104
$3,695

The 1981 UDAG program:
•

Current eligibility standards do not target funds on the most distressed areas. Without the
pockets-of-poverty provision, over 50 percent of all large cities are eligible; with the
provision, the percent approaches 100 percent.

•

Current law requires that 25 percent of the funds be used for smaller communities, while no
more than 20 percent may be used for pockets of poverty.

•

In 1980 the average grant awarded was about $2.0 million.

•

Funding in 1981 is $675 million.

The new, combined 1982 program:
•

Entitlement grants will go to large cities and urban counties as before.

•

Entitlement grants will be made to States. (Indian tribes will receive a portion of these
funds.)

•

There will be a UDAG-type account for 1982 only. These funds will be used in the State
program after 1982.

•

Less Federal intervention in local decision-making and increased local and State flexibility
and discretion in how these funds should be used will result.

•

Federal requirements, administrative expenses, and employment will be reduced.

1982 Funding
(dollars in millions)
Large Cities/Urban Counties
States
UDAG-type transition account
TOTAL

183

$2,791
875
500
$4,166

Federal Housing Administration/GNMA Mortgage-Backed Securities
Agency: Department of Housing
and Urban Development

Functional
Code: 604

Funding
1981

1982

Budget Reform
Criterion: 1
($ in millions)
1983
1984

1985

1986

FEDERAL HOUSING ADMINISTRATION
CARTER BUDGET:
Budget Authority
Outlays
REESTIMATES & ADJUSTMENTS:
Budget Authority
Outlays
PROGRAM CHANGES:
Budget Authority
Outlays
REAGAN BUDGET:
Budget Authority
Outlays

39.000
61

44,000
-116

44,300
-235

48,700
-387

53,600
-460

59.000
-505

0
0

-0
-45

0
-8

-4,845
-14

-9,000
-7

N/A
+ 15

N/A
+ 44

N/A
+ 81

N/A
+ 129

34.155
47

35,000
-168

-228

-387

-384

72,000
-175 "

72,000
-197

-351

* To be determined after a reexamination of FHA's role. $35 billion assumed for computational purposes.

GNMA MORTGAGE-BACKED SECURITIES
CARTER BUDGET:
Budget Authority
Outlays
REESTIMATES & ADJUSTMENTS:
Budget Authority
Outlays
PROGRAM CHANGES:
Budget Authority
Outlays
REAGAN BUDGET:
Budget Authority
Outlays

72,000
-82

72,000
-100

72.000
-128

72,000
-153

-8

-10

-4,000
+ 10

-1,000
+ 18

-8.000
+1

-8,000
+2

N/A
+3

64.000
47

64,000
-168

68,0001/
-228

+ 3,000
+ 24

+ 6.000
+ 30

N/A
+5

N/A
+6

N/A
+7

71,000 1/
-351

75.00017
-387

78,0001/
-384

These commitment levels are to be determined at a later date; numbers shown are for planning and estimating purposes only and
are based on no change in FHA insurance activity and a gradual increase in mortgages guaranteed by the VA.

Program Description
The National Housing Act of 1934, as amended, authorizes about 40 different mortgage insurance
programs designed to help finance the production, purchase, repair, and improvement of residential
single-family and multifamily properties. The Carter Budget proposed limitations of $39 billion in FY
1981 and $44 billion in FY 1982 on the amount of mortgages and loans that the Federal Housing
Administration (FHA) can make commitments to insure.
The GNMA Mortgage-Backed Securities program provides Federal guarantees on securities backed
by FHA and VA mortgages. The Carter Administration proposed to increase the 1981 enacted
commitment ceiling of $53 billion by $19 billion, to a total $72 billion, and to retain that commitment
level in 1982 and thereafter.
Because decreases in the limitation on commitments result in fewer fee and premium collections, FHA
and GNMA outlays increase whenever the commitment limitation is lowered. Budget authority for
FHA and GNMA is not affected by any of the proposed changes or reestimates.

Proposed Changes:
The Reagan Budget proposes a reduction in the amount of mortgages and loans that FHA can make
commitments to insure and a proportionate reduction in the limitation on GNMA mortgage-backed
securities as a part of this Administration's efforts to reduce programs that provide benefits to people
with middle and upper incomes.

184

Specifically, FHA commitments will be limited to approximately $35 billion and GNMA comitments
will be limited to $64 billion in 1981 and 1982. Even at these lower limits, FHA should be able to
insure all the homebuyers who are expected to request FHA insurance in 1981 and as many as 400,000
homebuyers in 1982.
Other changes that will reduce FHA outlays in the Reagan budget include:
•

An increase in rent contributions of tenants living in projects owned by FHA will be
implemented as part of an effort to recover from users more of those costs which are clearly
allocable (see rent contributions paper for more details); and

•

More cash sales, particularly of projects sold with Section 8 assistance, will be implemented
to eliminate the unintended benefits that accrue from duplicative rent assistance and
preferred interest rate subsidies.

Rationale
These reductions in FHA and GNMA credit limitations are consistent with proposed reductions in the
Section 8 housing program (requiring multifamily insurance) and FHA's share of expected mortgage
credit demand. In addition, the Administration will soon begin a thorough reexamination of the role of
FHA and GNMA in the housing credit market. This reexamination has been prompted by the following
items:
•

Private mortgage insurers (PMIs) provide equivalent insurance at a lower price to the same
middle-income homebuyers who currently use FHA.

•

The private mortgage insurance industry is competitive and is as large as FHA. Moreover,
PMIs are willing and able to expand their business if FHA insurance is gradually eliminated;
because of this no disruption of housing markets is likely to occur.

•

Changes in the secondary market for mortgages, particularly the rapid increase in the use of
privately-issued securities backed by conventional mortgages, raises questions as to the future
need for FHA insurance by secondary market participants, as well as the future need for
GNMA mortgage-backed securities.

Key Facts About the Program
•

The average annual income of the families who purchased new homes under the largest
FHA insurance program was $31,815 during the 4th quarter of 1980; for the families who
purchased existing homes, it was $28,936.

•

FHA's share of single-family mortgage originations has decreased from nearly 25 percent in
1970 to about 12.6 percent in 1980. During the same time span, PMIs have increased their
share of single-family mortgage originations from less than 4 percent to 14.5 percent.

•

FHA and GNMA mortgage-backed securities accounted for over 55 percent of the $171
billion of total new commitments issued to guarantee loans by the Federal Government in
1980.

•

The amount of GNMA mortgage-backed securities has increased from less than $14 billion
to nearly $21 billion between 1976 and 1980. During the same time span the amount of
privately-issued securities backed by conventional mortgages has gone from 0 to nearly $5.3
billion.

185

GNMA Tandem Mortgage Assistance Programs
Agency: Department of Housing
and Urban Development

Functional
Code: 371

Funding
1981
CARTER BUDGET:
Budget Authority
Outlays
REESTIMATES & ADJUSTMENTS:
Budget Authority
Outlays
PROGRAM CHANGES:
Budget Authority
Outlays
REAGAN BUDGET:
Budget Authority
Outlays

1982

Budget Reform
Criterion: 4
($ in millions)
1984
1983

1985

1986

1,407
594

492
1,173

504
24

706
1,381

1,073
1,079

1,246
1,246

+ 180
+ 354

-374
-501

-8
-215

-177
-157

-39
-75

-47
-45

-196
+3

+ 2.137
-4

-490
-258

-490
-289

-850
-890

-1,004
-1,144

1,391
951

2.255
668

6
967

39
935

184
112

195
57

Program Description
The Government National Mortgage Association (GNMA) Tandem programs are currently used to
provide subsidized mortgage financing (i.e., mortgages at 7.5 percent) for Section 8 rental housing
projects and certain unsubsidized middle-income apartment projects located in urban areas. The
Carter Administration proposed to continue the tandem program in 1982 to support $300 million in
mortgages and to create a new upfront grant program to support $1.7 billion in mortgages. This total
$2 billion program level would also be supported in 1981 through a $200 million supplemental
requested in the Carter budget (in addition to the $1.8 billion in direct loans already authorized).
Similarly, commitments to purchase $2 billion of 7.5 percent mortgages were made each year from
1978 to 1980.
Once the apartments involved have been constructed, GNMA is obligated to purchase the mortgages
on the projects at full value. GNMA does not hold these mortgages but rather auctions them off to
large investors. GNMA absorbs a loss on the sale of these mortgages in an amount sufficient to bring
their yields up to market interest rates. This loss reflects the subsidy provided.

Proposed Changes
•

For 1981, this Administration does not propose that any additional tandem mortgage
commitment activity be authorized and the Carter supplemental request is being withdrawn.

•

This Administration is planning to shut down these subsidized mortgage financing programs.
However, for 1982, the Administration is proposing to buy out the pipeline of projects (i.e.,
projects that had at least FHA conditional or firm insurance commitments by February 13,
1981) currently being developed. This will require a total $3.6 billion tandem commitment
level, $3.3 billion above the Carter 1982 request level. The outlay effect of this increase will
not be felt until 1983-84.

•

No new subsidized mortgage financing programs will be proposed.

Rationale
•

As part of the Administration's efforts to apply sound economic criteria to economic subsidy
programs, those programs providing apartment project mortgages at below-market interest
rates will be ended. Rather than providing specialized credit subsidy programs to a fortunate
few businesses and households, the President's economic recovery program is designed to
reduce inflation and interest rates, thereby benefitting all businesses and households and
stimulating housing construction throughout the economy.

•

To the extent that these subsidized mortgages were used for HUD subsidized rental projects
(Section 8 Tandem), the full cost of these projects should be reflected under the basic rental
subsidy program budget, rather than "piggybacking" additional subsidies on them through
separate subsidized financing arrangements. Moreover, use of the GNMA tandem financing
subsidies adds to Federal outlays in the short-term relative to rental subsidy contracts, which
commit the Federal Government to a roughly constant stream of payments over 20 to 30

•

To the extent that these subsidized mortgages were being used to promote the construction
of rental apartments for middle-income tenants (Targeted Tandem), this is a low priority
objective in an austere budget environment.

Key Facts About the Program
•

As of the end of FY 1980, the GNMA tandem mortgage subsidy programs have
accumulated a net loss of over $3.4 billion. This figure essentially represents borrowing from
the Treasury that GNMA has no prospect of repaying.

•

GNMA is now holding a portfolio of $4.4 billion in below-market rate mortgages and has
outstanding commitments to purchase yet another $6.5 billion.

•

Recent losses on sales of these mortgages have been running at 40 cents per dollar.

•

The subsidy now being provided reduces debt service on an apartment project mortgage by
about $2,200 per unit per year.

•

The $3.6 billion pipeline consists of 868 projects with 92,717 units, of which 34,959 units are
expected to get Section 8 rental subsidies; the balance will be for tenants not eligible for
Section 8 assistance.

187

Housing Counseling Assistance
Agency: Department of Housing
and Urban Development

Functional
Code: 506

Budget Reform
Criterion:
1

Funding
CARTER BUDGET:
Budget Authority
Outlays
REESTIMATES & ADJUSTMENTS:
Budget Authority
Outlays
PROGRAM CHANGES: 17
Budget Authority
Outlays
REAGAN BUDGET:
Budget Authority
Outlays
1/
Budget Authority
Outlays

($ in millions)
1984
1983

1981

1982

10
9

10
10

-6
-2

-6
- 5

-6
-6

-6
- 6

4
7

4
5

4
4

s proposal. Total savings expected are as follows:
1982
1984
1981
1983
-7
-6
-8
-8
-2
-7
-5
-8

1985

1985
-9
-9

1986

1986
-10
-9

Program Description
The Housing Counseling Assistance program provides discretionary grants and technical assistance to
HUD-approved private and public nonprofit housing counseling agencies. These agencies provide
information and advice to current and prospective tenants and homeowners of HUD-assisted or
HUD-insured housing. The Carter Budget planned for $10 million of grants per year to an estimated
400 approved agencies to support default, comprehensive, renter, and pre-purchase counseling.

Proposed Change
This proposed change would reduce the Housing Counseling Assistance program, providing financial
support only for default counseling. Comprehensive, renter, and pre-purchase counseling would be
discontinued.

Rationale
•

The application of sound criteria to economic subsidy programs requires that housing
counseling support be limited to those activies where the benefits exceed the cost.

•

Several HUD studies have indicated that default counseling may have a beneficial impact
and be a cost effective use of Federal funds. Accordingly, it is being continued.

•

However, comprehensive, renter, and prepurchasing counseling, have not been shown to -be
an effective use of limited Federal funds and no further Federal financial support will be
provided. Communities can use their Block Grant funds to support these counseling
activities they deem effective.

Key Facts About the Program
•

Default counseling was the original intent of this program when it was established in 1968.

188

Neighborhood Self-Help Development
Agency: Department of Housing
and Urban Development

Functional
Code: 451

Budget Reform
Criterion:
1

Funding
1981
CARTER BUDGET:
Budget Authority
Outlays
REESTIMATES & ADJUSTMENTS:
Budget Authority
Outlays
PROGRAM CHANGES: 17
Budget Authority
Outlays
REAGAN BUDGET:
Budget Authority
Outlays
17

1982

($ in millions)
1984
1983

1985

1986

9
15

9
9

-8
-4

-9
- 6

-9
-9

-9
- 9

1
11

0
3

0
0

The Carter Budget already included savings for this proposal. Total savings expected are as follows:
1982
1981
1983
1984
-8
-10
-11
-11
Budget Authority
-4
-6
-10
-11
Outlays

1985
-12
-11

1986
-12
-12

Program Description
The Neighborhood Self-Help Development program provides discretionary grants and technical
assistance to neighborhood organizations to undertake specific neighborhood preservation and
revitalization activities in lower income areas. The Carter Budget planned for an estimated 60 grant
recipients per year.

Proposed Change
This proposed changed would terminate the Neighborhood Self-Help Development program. It is
estimated that no neighborhood organizations would receive grants from this program beginning in
1981.

Rationale
•

The consolidation of categorical grant programs into block grants. More specifically, the
Neighborhood Self-Help Development program unnecessarily duplicates the efforts of the
Community Development Block Grant program, which provides localities with funds that
can be used for neighborhood preservation and revitalization activities, and the
Neighborhood Reinvestment Corporation, which largely provides technical assistance to meet
these same goals.

Key Facts About the Program
•

The Neighborhood Reinvestment Corporation provides a similar service and has received
praise for its innovative approaches to neighborhood revitalization, something the
Neighborhood Self-Help Development program has not received.

•

Established in 1978, this program did not award its first grants until 1980 because of start-up
delays.

•

As a categorical grant program, it is staff intensive.
Federal employment.

189

Its termination will help to reduce

Planning Assistance
Agency: Department of Housing
and Urban Development

Functional
Code: 451

Funding
CARTER BUDGET:
Budget Authority
Outlays
REESTIMATES & ADJUSTMENTS:
Budget Authority
Outlays
PROGRAM CHANGES: 17
Budget Authority
Outlays
REAGAN BUDGET:
Budget Authority
Outlays

Budget Reform
Criterion:
1
($ in millions)
1983
1984

1981

1982

34
40

35
35

-35
-3

-35
-24

-35
-35

-35
- 35

-1
37

0
11

0
0

The Carter Budget already included savings for this proposal. Total savings expected are as follows:
1981
1982
1984
1983
Budget Authority
-37
-42
-35
-39
-24
-3
-36
-39
Outlays

1985

1985
-44
-41

1986

1986
-46
-44

Program Description
The Planning Assistance program (previously known as the Comprehensive Planning Grant program)
provides discretionary grants to States, areawide organizations, and localities to support, in part,
general planning and management activites. The Carter Budget planned for direct grants to ah
estimated 1,000 entities in 1982. Some of these grants funds, especially those to States, would have
been passed through to individual localities.

Proposed Change
This proposed change would terminate the Planning Assistant program. It is estimated that no States,
areawide organizations, or localities would receive planning funds begining in 1981.

Rationale
•

Application of sound criteria to economic subsidy programs.
Since the benefits of
sub-national planning activities directly and primarily accrue to sub-national entities, they,
and not the Federal Government, should be expected to pay for these activities if they judge
them sufficiently worthwhile to support Other sources of Federal assistance (e.g., General
Revenue Sharing and Community Development Block Grant funds) can be used to support
sub-national planning activities at the discretion of the recipients.

•

After 26 years and over $1 billion in planning grants to develop local planning capacity, that
capacity now exists. State and local governments should sustain it if it is worthwhile.

•

General planning assistance not directly related to program implementation has not been
proven as effective in influencing program implementation as program implementation
oriented planning.

Key Facts About the Program
•

Since 1978 States and areawide planning organization have been- the principal recipients of
these planning funds. Entitlement CDBG recipients have not received direct financial
support from this program since they may use a portion of the CDBG entitlement grants for
planning activities.

190

•

The following table shows the distribution of 1980 funds and the number of recipients.

States
Areawtde Organizations
Localities
Other
TOTAL

Number
of Eligible
Applicants
57
639
33,141
435
34,272

191

Number
of Actual
Recipients
56
560
600
50
1,266

Fund
Distribution
$8.9M
S23.3M
$6.3M
Sl.lM
$39.7M

Average
Award
$159K
S41K
$10K
$22K
$31K

Public Housing Operating Subsidies
Agency: Department of Housing
and Urban Development

Functional
Code: 604

Funding
1981
CARTER BUDGET:
Budget Authority
Outlays
REESTLMATES & ADJUSTMENTS:
Budget Authority
Outlays
PROGRAM CHANGES: 17
Budget Authority
Outlays
REAGAN BUDGET:
Budget Authority
Outlays

1982

Budget Reform
Criterion: 1
(S in millions)
1984
1983

1985

1986

1,071
972

1,265
1,141

1.491
1,389

1,503
1,458

1,495
1,499

1,601
1,554

-100
-43

-60
-90

-391
-242

-518
-462

-477
-496

-641
-568

971
929

1.205
1,051

1,100
1,148

985
1,037

1,018
1,003

960
986

Included in program changes are increases in rent contributions for public housing tenants
1982
1981
1983
132
Budget Authority
60
—
100
Outlays
33

as follows:
1984
213
177

1985
302
262

1986
402
357

Program Description
Public housing operating subsidies are paid to 2,700 public housing agencies (PHAs) who administer
about 1,157,000 units of public housing—97 percent of all public housing units. Subsidies typically
account for 40-50 percent of local housing authorities' operating income. Subsidy is calculated
according to a formula that projects operating and utility costs and subtracts tenant rent contributions
to determine the Federal payment Rising operating subsidy needs of PHAs have been driven by (1)
increases in the number of public housing units funded by the HUD subsidized housing appropriation
and (2) the extent to which growth in tenant income and rent contributions has not kept pace with
inflation in operating costs. In addition, rapid increases in utility costs have produced an estimated
$140 million shortfall in 1981. The Carter budget included:
•

A 1981 supplemental appropriation request for $100 million to cover most of the shortfall
from rising utility costs; and

•

A retrospective inflation adjustment of $82 million in 1982 and increased amounts in the
outyears to correct for past inaccuracies in projecting the impact of inflation upon operating
costs.

Proposed Change
•

No 1981 supplemental appropriation request.

•

Increases in tenant rent levels consistent with the increases proposed in Section 8 and other
HUD subsidized rental housing programs: 1 percent of income per year for 5 years to a
maximum level of 30 percent of income by 1986.

•

1982 funding to include $82 million as proposed in the Carter budget but no further
adjustments—beyond Administration economic forecasts—for inflation in 1983 and
thereafter.

Rationale
•

In order to revise social service programs to eliminate unintended benefits and improve
equity in the public housing program, rent levels are being increased and a strenuous effort
is being made to hold the Federal payment to cover public housing operatingsosis to a
minimum. (The Federal Government already pays the full cost of constructing public
housing.)

192

•

The Administration believes that the entire $140 million shortfall in 1981 funding may be
recovered by public housing agencies (PHAs) through payments they receive under the HHS
Low-Income Energy Assistance program. HUD is working with HHS to see what changes
can be made in the HHS program to encourage State welfare agencies to make such
payments to PHAs.

•

Requirements for 1983 and beyond are speculative at this point, but there is no reason to
assume that operating costs for public housing projects should be projected to rise at a rate
faster than the overall rate of inflation in the economy.

Key Facts About the Program
•

Federal operating subsidy payments have grown from $13 million in 1969 to an estimated
$1.2 billion in 1982. Operating subsidy per unit will be over $1,000 per year by 1982.

•

Profile of public housing tenant population today:
— 45 percent elderly.
— More than 60 percent minority.
— More than 80 percent estimated to be receiving AFDC, Social Security,
or other federally supported transfer payments.

•

344-211

A large number of PHAs—especially large urban authorities—have virtually no cash
reserves; 11 authorities were in net deficit positions in 1980. However, more than 85 percent
of all PHAs are considered to have adequate reserves.

193
0-81-7

Rehabilitation Loan Fund
Agency: Department of Housing
and Urban Development

Functional
Code: 451

Funding
CARTER BUDGET:
Budget Authority
Outlays
REESTIMATES & ADJUSTMENTS:
Budget Authority
Outlays
PROGRAM CHANGES:
Budget Authority
Outlays
REAGAN BUDGET:
Budget Authority
Outlays

Budget Reform
Criterion: 7
(S in millions)
1984
1983

1981

1982

130
133

134
135

138
140

-111
-39

-134
-199

19
94

0
-64

1985

1986

142
142

144
144

146
146

-138
-214

-142
-215

-144
-217

-146
- 218

0
-74

0
-73

0
-72

Program Description
The Rehabilitation Loan Fund provides low-interest loans for single-family and multifamily, as well
as a small amount of commercial, rehabilitation in order to promote the revitalization of distressed
areas. Loan repayments, as well as new budget authority, are used to make new loans. The Carter
Budget planned for the rehabilitation of an estimated 12,500 units annually.

Proposed Change
This proposed change would terminate the Rehabilitation Loan Fund. It is estimated that this
proposed change would result in an estimated 9,150 units in 1981 and 12,500 units annually thereafter
not being rehabilitated which otherwise would have been rehabilitated through this program.

Rationale
•

The consolidation of categorical grant programs into block grants; the Rehabilitation Loan
Fund unnecessarily duplicates the efforts of the Community Development Block Grant
program, which provides to the same localities funds which may be used for identical types
of rehabilitation.

•

The CDBG program provides local communities a more flexible vehicle for encouraging
housing rehabilitation, and communities are now using over $1 billion annually from Block
Grant funds to support rehabilitation activities.

•

By terminating this prgram and relying solely on the use of block grants, local discretion is
enhanced, Federal interference in local decision-making is lessened, unnecessary bureaucratic
red tape is eliminated, and Federal employment is reduced.

Key Facts About the Program
•

CDBG funds and Rehabilitation Loan Funds go to the same localities. (There is about a 98
percent overlap.)

•

CDBG funds can be used for the exact same types of rehabilitation as Rehabilitation Loan
Funds. In fact, CDBG-sponsored rehabilitation can make use of loans, interest subsidies,
and direct grants (which can reach lower-income people than loans), while the Rehabilitation
Loan Fund can only use loans.

•

Rehabilitation Loan funds do not necessarily serve only low income people. HUD estimates
that in 1979, 26 percent of the loans were made to people who w"ere not classified as low or
moderate income.

•

This program was to have been consolidated with six other programs in 1974 to form the
Community Development Block Grant program. It was not consolidated, though the CDBG
program was formed.

•

In the past the program has had a problem with defaults, though HUD has recently been
making a good effort to remedy this situation.

194

Research and Technology
Agency: Department of Housing
and Urban Development

Functional
Code: 451

Funding
CARTER BUDGET:
Budget Authority
Outlays
REESTIMATES & ADJUSTMENTS:
Budget Authority
Outlays
PROGRAM CHANGES:
Budget Authority
Outlays
REAGAN BUDGET:
Budget Authority
Outlays

1981

1982

45
48

50
49

Budget Reform
Criterion: 6
(S in millions)
1984
1983

1985

1986

50
50

-8
-2

-15
-6

-17
-15

-17
-17

45
46

35
35

33
35

33
33

Program Description
The Research and Technology account provides funding for major data collection efforts, program
impact evaluations, and related topics of the Department. Housing and community development issues
are the predominant focus of these efforts, although neighborhood activities, consumer protection, and
equal opportunity are also researched.

Proposed Change
The funding for research would be reduced and efforts would focus on critical basic data
collection—such as the Annual Housing Survey—and high-priority program concerns. Projects would
be expected to provide an identifiable end-product of use in the forseeable future.

Rationale
A reduced funding level will ensure that only high-priority projects are funded. It will require the
setting of priorities and adherence to these priorities in order to accomplish the major analyses and
evaluations required for program reform.

195

Solar Energy and Energy Conservation Bank
Agency: Department of Housing
and Urban Development

Functional
Code: 272

Budget Reform
Criterion: 4

Funding
CARTER BUDGET:
Budget Authority
Outlays
PROGRAM CHANGES:
Budget Authority
Outlays
REAGAN BUDGET:
Budget Authority
Outlays

($ in millions)
1984
1983

1981

1982

121
47

125
134

125
125

-121
-47

-125
-134

0
0

1985

1986

125
125

-125
-125

0
0

Program Description
Created by the Solar Energy and Energy Conservation Bank Act (Title V of the Synfuels bill) in July
1980, the Solar Energy and Energy Conservation Bank is really two programs: (1) a program of direct
grants and loan subsidies to stimulate energy conservation and (2) a program to promote (through
loan subsidies) solar technology—especially residential passive solar investments. Both programs
would provide greatest support for investments in residences, but agricultural and commercial
buildings were also made eligible for loan subsidies. The Carter Budget proposed to keep funding for
the Bank fairly low in relation to authorized levels. The initial 1981 appropriation of $121 million was
expected to support 50 percent of the cost of energy conservation investments made by about 75,000
households and to reduce mortgage costs for 11,000 purchasers of new passive solar homes. Actual
disbursement of subsidies was expected to be handled through private fiscal agents under contract
with the Bank.

ProposedChange
This new program will not be started up:
•

The 1981 appropriation is proposed for rescission;

•

The 1982 budget has been amended to withdraw the full amount of the Carter
Administration's request ($125 million); and

•

Regulations will not be issued and no loan subsidies will be disbursed.

Rationale
•

As part of the Administration's overall efforts to apply sound criteria to economic subsidy
programs, this separate new energy conservation subsidy program should not be started up.
Rather than favoring a portion of U.S. households with subsidies to induce conservation, the
Administration will rely upon rising prices and existing tax credits to encourage all American
households to reduce energy consumption and make conservation investments. In addition,
the President's economic recovery program is designed to secure lower interest rates and
improve general credit market conditions, thereby improving the ability of all households to
borrow for a variety of worthwhile purposes.

•

This step is part of the Administration's overall effort to halt the proliferation of Federal
programs to fine tune the energy marketplace.

•

To the extent local governments seek to promote energy conservation by certain groups, e.g.,
low-income households, they can use community development support assistance funds for
this purpose.

Key Facts About the Program
•

Currently available tax credits include a 15 percent credit, up to a maximum $300, for
energy conservation and a 40 percent credit, up to a maximum $4,000, for solar and other
renewable energy source equipment. These tax credits are expected to cost the Federal
Government $538 million in foregone revenues in 1981.
196

Initial program implementation guidelines established by the Carter Administration would
have targeted the energy conservation subsidies on households with incomes between 50 and
80 percent of the median. Although only 75,000 such households would have received
benefits in 1981, there are estimated to be 15 million households in this income range,
including 8.5 million homeowners.
The Bank is authorized through FY 1987, but amounts are authorized for appropriations
only through FY 1984 and are as follows:
Fiscal Years (dollars in millions)
1982
1981
1983
Solar

100

200

225

Energy Conservation

200

625

800

1984

875

Promotional expenses are authorized to use up to $20 million of the 1981 appropriation and
$15 million per year in 1982-83.

197

Subsidized Housing Program: Summary

Funding
1981
CARTER BUDGET:
Budget Authority
Outlays
REESTEVIATES & ADJUSTMENTS:
Budget Authority
Outlays
PROGRAM CHANGES: 17
Program Level
Budget Authority
Outlays
Tenant Rent
Contribution
Budget Authority
Outlays
Rental Assistance Payments
Budget Authority
Outlays
Indian Housing
Budget Authority
Outlays
Public Housing Modernization
Budget Authority
Outlays
REAGAN BUDGET:
Budget Authority
Outlays
17

The Carter Budget already included
budget reductions, are as follows:
Budget Authority
Outlays

Budget Reform
Criterion: 5

Functional
Code: 604

Agency: Department of Housing
and Urban Development

1982

(S in millions)
1984
1983

1985

1986

29,502
5,637

28.775
6,982

31,896
8,153

33,905
9,704

33,566
11,301

37,580
12,898

-6
-8

-15

-3.258
+ 149

-4,580
+ 23

-5,990
-204

-7,335
-312

-4,632
-3

-8,688
-19

-9.421
-76

-10,143
-215

-10.838
-483

-11.510
-825

-86

-204

-354

-530

- 731

-149
-5

-163
-10

-180
-15

-198
-21

-217
- 28

-703

-744

-784
-3

-824
-19

-865
-45

-500

-800
-7

-800
-27

-800
-60

-800
-100

18.736
6,857

17,510
8,005

17,418
9,113

16,916
9,984

16,853
10,857

—
—

-161
—

-300
—

24,403
5,626

subsidized housing. Total expected savings, including both Carter and Reagj
1981
-5,599
-16

1982
-14,086
-211

1983
-16,289
-405

1984
-19,028
-926

1985
-21,023
-1,684

1986
-22,857
-2,402

Estimates do not include savings in Public Housing program which are reflected in the justification section on Public Housing
operating subsidies.

198

Subsidized Housing Program: Program Level
Agency: Department of Housing
and Urban Development

Funding (see summary

Functional
Code: 604

table)
1981

PROGRAM CHANGES:
Budget Authority
Outlays

-4,632
-3

1982
-8,688
-19

Budget Reform
Criterion: 1
($ in millions)
1983
1984
-9,421
-76

-10,143
-215

1985
-10,838
-483

1986
-11,510
-825

Program Description
HUD provides rental assistance to more than 3.2 million lower income households through two active
programs: (1) the Lower Income Housing Assistance (Section 8) program, and (2) the Public Housing
program.
Under the Section 8 program, HUD makes commitments to subsidize rents for low-income families in
newly constructed and existing private housing. Families with incomes below 80 percent of area
median income receive assistance equal to the difference between the actual rent for their units and a
tenant rent contribution, currently limited to 25 percent of the family's adjusted income. Actual rents
are limited to a maximum "fair market rent" established and revised annually for the area by HUD.
Fair market rent ceilings are substantially higher for newly constructed units than for existing housing,
reflecting the higher cost of producing new units.
Under the public housing program, HUD supports the construction of low-income housing owned
and operated by local public housing agencies (PHAs) by making annual payments to the PHAs to
amortize their long-term, tax-exempt debt issued to finance these projects.

Proposed Change
•

•

For the planned number of additional subsidized housing units, the Administration proposes
to:
— reduce the 1981 program from 255,000 to 210,000 units;
— reduce the 1982 program from 260,000 to 175,000 units.
The ratio between commitments for new construction and commitments for existing housing
will also be shifted slightly towards more existing units to take greater advantage of the lower
cost existing housing program.

Rationale
•

•

•
•

Reducing the level of the subsidized housing program is part of the general effort to control
long-term Federal Government spending and thereby eliminate inflation and promote
economic growth. By the end of 1981, the Federal Government will have outstanding
commitments to spend more than $239 billion over the next 40 years for subsidized housing.
The Administration's proposed subsidized housing program levels for 1981 and 1982 reflect a
balance between our concern about continuing to help overcome housing problems among
the truly needy and the need to reexamine the relative effectiveness, efficiency, and equity of
our current programs for meeting those housing problems.
Changing the new/existin| unit mix from the proposed 50:50 mix for 1982 to a 45:55 ratio
favoring the use of existing housing will reduce long term budget authority commitments
without a concomitant reduction in the total number of families assisted.
While the Administration reviews a wide range of issues affecting the national housing
situation, we are proposing reforms that will not reduce benefits to tenants currently living in
subsidized housing, but will only reduce the rate of growth of the program. In fact, the
Administration's 1981 housing program of 210,000 units will still provide a slight increase
above the actual 1980 program level (206,000) achieved by the previous administration.

199

Key Facts About the Program
•

Even if we make no new subsidized housing commitments after 1981, by 1986, the Federal
Government's subsidized housing outlays will grow by 68 percent, increasing from $5.6
billion in 1981 outlays to over $9.4 billion in 1986 outlays. These expenditures will not help
any additional low-income families beyond those we are already committed to serve.

•

The average annual unit cost for a typical newly constructed Section 8 unit was $3,584 in
1976; in the 1982 budget, this same units is estimated to cost $7,025 per year, an increase of
more than 95 percent over a 6-year time period.

•

Existing Section 8 units have substantially lower per unit budget authority costs than newly
constructed units:
Type of Unit

Average Budget Authority Per Unit (FY 1982)

Section 8 new construction
Public Housing
Section 8 existing
•

$144,000
$135,000
$ 54,000

Only an estimated 10 percent of the income eligible population is. currently being served by
the HUD-subsidized housing programs. The horizontal equity of providing very deep
housing subsidies to a limited number of all eligible renters is questionable, particularly when
so many unsubsidized tenants pay more than 25 percent of their incomes towards rent. (See
separate justification section on tenant rent contribution).

200

Subsidized Housing Program: Tenant Rent Contribution
Agency: Department of Housing
and Urban Development

Funding (see summary

Functional
Code: 604

table)
1981

PROGRAM CHANGES: 17
Budget Authority
Outlays
17

Budget Reform
Criterion: 1

1982

(S in millions)
1984
1983

-60
-119

-132
-304

-213
-530

1985
-302
-792

1986
-402
-1088

Includes savings for public housing operating subsidies.

Program Description
Under current regulations, tenants living in section 8 subsidized housing, public housing, and other
HUD subsidized units are limited to paying not more than 25 percent of their adjusted incomes
towards rent. The Federal Government subsidizes the difference between the actual market rent
charged for the unit (or, in the case of public housing, the per unit operating cost) and the tenant's
rent contribution. Although Congress authorized HUD in 1979 to increase tenant rent payments for a
limited number of new tenants, HUD has not implemented this authorized increase.

Proposed Change
The Administration proposes to gradually increase the maximum allowable rent contribution paid by
tenants living in federally subsidized housing from 25 percent to 30 percent of their adjusted incomes.
To achieve this policy change, the President will propose the legislation required to apply the rent
burden increases to all tenants. The rent increase from 25 percent to 30 percent of income will be
phased in at 1 percentage point of income per year over the next 5 years. Currently, very needy
households pay less than 25 percent of their incomes for rent in HUD subsidized housing projects.
Since this proposal provides for the same increase for all tenants, the differential for the very needy
will be maintained.

Rationale
•

This increase in tenant rent contributions will reduce some of the inequity of providing very
large subsidies to less than 10 percent of the total income eligible households while the rest
currently receive no subsidies at all. Moreover, tenants in HUD-subsidized housing are not
only receiving a deep subsidy under the current 25 percent cap, but they are generally living
in housing of higher quality than that occupied by unsubsidized households of comparable
income.

•

More than 13 million renters at all levels of income have been paying a greater percentage of
their incomes for rent in recent years. The median rent/income ratio increased from .20 in
1970 to .26 in 1979.

•

Even after the gradual phase-in of the increase in tenant rent contributions is completed in
1986, the over 3.2 million households currently living in subsidized housing will continue to
pay on the average a much lower percentage of their incomes for better housing than the
over 30 million lower income households who live in unsubsidized housing. Tn 1979, rent
paid by those in the bottom fifth of the income distribution of renters averaged 47 percent of
cash income.

•

It is estimated that the increased rent payment for subsidized tenants in 1982 will average less
than $5 per month.

Key Facts About the Program
•

The proposed increase in the rent-to-income ratio for subsidized tenants refers to net
income after deductions.
Even after the increase to 30 percent of net income is
implemented, on the average, subsidized housing tenants will still only be paying about 27.8
percent of gross income by 1986.

201

•

The 25 percent rent contribution standard which was established by the Brooke Amendment
of 1969 no longer has any factual support. On average, rent contributions exceed 25 percent
by a substantial amount for the 20 percent of families eligible for housing assistance as well
as for the next 20 percent of families with incomes too high to be eligible for housing
assistance (see table below). Furthermore, the average rent contribution for all families has
been increasing.
Tenant Rent Contributions, 19741979
(Metropolitan area tenants only; excludes public housing tenants)
Rent Contributions as a Percent of Income*
Income Class
1974
1979
Lowest fifth
44%
47%
Lower fifth
24
27
Middle fifth
18
19
Upper fifth
14
15
Highest fifth
11
12
Percent paying more than 25% and 30% of income for rent*
1974
1979
30%
25%
30%
Income Class
25%
47%
Total
39%
29%
35%
74
88
Lowest fifth
85
78
Lower fifth
52
42
22
29
4
15
Middle fifth
11
6
Upper fifth
5
3
1
1
1
Highest fifth
1
0
0
* Includes utilities and other shelter costs.

202

Subsidized Housing: Rental Assistance Payments
Agency: Department of Housing
and Urban Development
Funding

Functional
Code: 604
1982

($ in millions)
1983
1984

-149
-5

-163
-10

(see summary table)

PROGRAM CHANGES:
Budget Authority
Outlays

Budget Reform
Criterion: 1

-180
-15

1985
-198
-21

1986
-217
- 28

Program Description:
The Rental Assistance Payments (RAP) program was established by the Housing and Community
Development Act of 1974 to reduce the rent burden for very low income tenants in HUD rental
housing units subsidized under the Section 236, Rental Housing Assistance Program. Under the
original Section 236 program, HUD provided subsidies to project owners to reduce their effective
mortgage interest rate down to 1 percent. This subsidy was then passed on to eligible low and
moderate income tenants through a reduced rental rate. (Every tenant was required to pay either the
basic rental charge, equal to operating costs plus amortized debt service at a 1 percent interest rate, or
25 percent of income—whichever was higher.) Some very low income tenants were faced with tenant
rent burdens substantially greater than 25 percent of their incomes when the basic rental charge
increased faster than did their incomes. The RAP program was designed to overcome this problem
by providing an additional subsidy to landlords equal to the difference between the basic rent (already
subsidized) and 25 percent of income for eligible low income tenants.
RAP subsidies have previously been funded by using unobligated and recaptured authority available
from the Section 236 program. When the 1982 Budget was prepared last fall, it was estimated that all
the available Section 236 authority would be exhausted by the end of FY 1981. Therefore, the 1982
Carter Budget requested an additional $148.5 million in budget authority to fund expected 1982
increases in operating costs for about half of those units occupied by RAP tenants.

Proposed Change
The Reagan Administration proposes to withdraw the request to provide funding for increased rental
assistance payments.

Rationale
The proposal to withdraw the request for additional RAP funds is made to eliminate the unintended
benefits that would accrue if duplicative subsidies were provided. The additional funding is no longer
needed because:
•

HUD underestimated the amount of authority that would be available to carryover into 1981;
thus, at the expected rate of utilitization of RAP funds in 1981, all Section 236 authority will
not be exhausted by the end of FY 1981.

•

The proposed increase in tenant rents will further reduce any need for additional Federal
operating subsidies.

Key Facts About the Program
Section 236 interest reduction subsidies are currently being paid on about 535,000 units; the occupants
of about 34,000 of these units receive RAP subsidies.

203

Subsidized Housing Program: Indian Housing
Agency: Department of Housing
and Urban Development

Functional
Code: 604

Funding
1981

1982

Budget Reform
Criterion: 1
(S in millions)
1984
1983

1985
1
PROGRAM CHANGES:.1/
-824
Budget Authority
-161
-703
-744
-784
-19
Outlays
- -3
1/ The Carter Budget already included savings for this proposal. Total savings expected are as follows:
1985
1981
1982
1983
1984
-1,227
Budget Authority
-161
-1,055
-1,113
-1,168
-25
Outlays
- -—
--3

1986
-865
-45
1986
-1,289
-63

Program Description
This is a special set-aside within the public housing production portion of the subsidized housing
program. Local implementation is through 164 Indian Housing Authorities' serving Indian reservations
with a population of approximately 700,000. From the early 1960's to the end of FY 1980
commitments were made to support a little over 54,000 Indian housing units. Most recent data
(2/28/81) indicate that of this total, 39,000 units are now completed, 10,000 units have not been
started, and 5,000 are under construction. Commitments to construct 5,000 to 6,000 new units per
year have been made for the past several years. The Carter budget proposed to reduce this level to
4,000 units in 1982. Water and sanitation facilities for the HUD-supported units are usually provided
by the Indian Health Service in HHS, while the Bureau of Indian Affairs typically builds access roads.
Approximately 70 percent of the Indian housing units have been single-family units constructed under
the Mutual Help Homeownership Opportunity program.

Proposed Change
•

This special category of subsidized housing is proposed for elimination beginning in 1982.

•

For 1981, the program level has been reduced slightly—as part of a proposed rescission of
subsidized housing budget authority—from 6,000 units in the Carter budget to 5,000 units.

Rationale
•

As part of the Administration's efforts to revise income maintenance programs to eliminate
unintended benefits, this very high cost program should be scrapped and more efficient
delivery mechanisms found.

•

Difficulties in translating units funded but not completed should be solved rather than
adding any more "paper commitments" and tying up budget authority.

•

Indian Housing Authorities have had difficulty in managing their HUD housing assistance
funds and in some cases have used new construction fiinds to pay the rent or mortgage
contributions required from assisted families.

•

As part of the Administration's policy to stretch out public sector capital investment activity,
the Indian Health Service (IHS) program—which must be relied upon for essential water and
sewer systems for HUD Indian housing construction—is being cut back.

Key Facts About the Program
•

•

Indian housing is very expensive:
—

$72,500 per unit estimated in 1981 rising to nearly $80,000 per unit in 1982 if the
program were continued.

—

The budget authority required per unit would be over $175,000 per unit in 1982.

Sources of the high cost of this program include the following:
—

Indian housing is built in remote locations with high transportation costs and difficulty
in attracting skilled labor.
204

—

Local contractors are often reluctant to bid on projects because of Davis-Bacon rules.

—

Although IHS pays for the construction of water and sewer facilities, the HUD
program must pay for hook-up to those facilities.

•

Despite the fact that no HUD-assisted units were built until the mid-1960's, many units are
in substandard condition and the cost of correcting design and construction deficiencies in
Indian and Alaskan Native housing is now estimated at over $50 million.

•

Given the current backlog of Indian housing commitments in the HUD pipeline at the end
of 1981 (15,000 units), it will take three years just to complete these units assuming that
recent completion rates continue.

205

Subsidized Housing Program: Public Housing Modernization
Functional
Code: 604

Agency: Department of Housing
and Urban Development

Funding
1981
CARTER BUDGET: 17
Budget Authority
Outlays
PROGRAM CHANGES:
Budget Authority
Outlays
17
•.1/
REAGAN BUDGET:
Budget Authority
Outlays
1/

1982

Budget Reform
Criterion: 5
(S in millions)
1983
1984

1985

1986

(2,000)
(246)

(2.000)
(296)

(2.000)
(371)

(2,000)
(471)

(2,000)
(571)

(2.000)
(671)

-300

-500

-800
-7

-800
-27

-800
-60

-800
-100

(1,700)
(246)

(1.500)
(296)

(1.200)
(364)

(1,200)
(444)

(1.200)
(511)

(1,200)
(571)

Included in totals for subsidized housing program.

Program Description
Public Housing Modernization is a program for funding periodic renovation and nonroutine
maintenance work on the federally supported public housing stock and has been ongoing for a
number of years. For 1981, Congress authorized a new expanded program aimed at making the
public housing inventory more energy efficient and less costly to operate.
This new, more
comprehensive modernization program is also intended to ensure that public housing projects in the
worst condition—the 8 percent of the units that are giving the entire public housing a bad image—are
made safe and sanitary and are in compliance with H U D minimum property standards. The total
budget authority required to complete this level of effort is about $6 billion in 1980 prices. The
Carter Administration planned to implement the new comprehensive -modernization program by
obligating $2 billion in budget authority per year beginning in 1981. Each $1 billion in budget
authority supports about S545 million in actual capital improvements.

Proposed Change
•

The overall effort will be stretched out by slowing the rate at which the objectives of the
comprehensive improvement program are met. However, the basic goals of the expanded
program will be achieved by 1985-86.

•

For 1981, $300 million in budget authority is proposed for rescission. For 1982, the Carter
budget request for $2 billion has been amended to $1.5 billion.

Rationale
•

This proposed change is justified in terms of the Administration's policy of stretching out
public sector capital improvement programs.

•

The Reagan budget proposal for modernization funding in 1981 and 1982 represents a
substantial (and more feasible) increase in modernization activity above the $1 billion level* of
1979 and 1980.

•

Because of delays in completing program design plans and regulations and in training staff,
there is reason to doubt that HUD can efficiently use $2 billion in FY 1981 funding.

•

The $2 billion annual program level is probably too ambitious in terms of the capacity of
HUD and public housing authority staffs to rapidly plan for and effectively carry out the
new comprehensive modernization program.

Key Facts About the Program
•

A recent study concluded that the current replacement cost of the 1.2 million units of
federally supported public housing in this country would be over $65 billion. More than
400,000 units of public housing are over 20 years old.

•

This study estimated the cost for public housing (in 1980 dollars) of correcting deficiencies,
meeting handicapped accessibility requirements, and making energy conservation
improvements to be $3.1 billion.

206

Department of the Interior

207

Bureau of Indian Affairs Operating and Construction Programs
Agency: Department of the
Interior

Functional
Code: 302

Funding
1981
CARTER BUDGET:
Budget Authority
Outlays
REESTIMATES & ADJUSTMENTS:
Budget Authority
Outlays
PROGRAM CHANGES
Budget Authority
Outlays
REAGAN BUDGET:
Budget Authority
Outlays

998
919

1982
1.055
925

Budget Reform
Criterion: 5/8
($ in millions)
1984
1983

1985

1986

1.132
985

1,177
1,023

1.236
1,074

1,290
1,119

-52
-42

-97
-80

-139
-117

-193
-162

-3
-3

-76
- 69

-79
-72

-79
- 72

995
916

979
856

1,001
871

1,018
885

LOIS
885

Program Description
The Bureau of Indian Affairs (BIA) provides services to Indians that non-Indians receive from all
three levels of government. BIA's operating programs include: education, social services, housing,
economic development, welfare, natural resources development, and rights protection.
BIA's
construction program includes funding for schools, irrigation projects, roads, and facility repair.

Proposed Change
For BIA's operating programs the Administration proposes:
•
The consolidation of 10 separate programs into a Consolidated Tribal Government Program,
a $41 million BA reduction.
•
Various other small reductions totaling $19 million in BA.
For BIA's construction programs the Administration proposes:
•
A reduction of $13 million in the facility improvement and repair program.
A reduction of $3 million in the road construction program.
•

Rationale
The Consolidated Tribal Government Program approach will: reduce tribal administrative burdens;
provide more program flexibility; and give tribal governments more say in the final allocation of the
overall reduction than is the case when cuts are made on an individual program basis. The
Consolidated Tribal Government Program will result in a 25 percent overall funding-reduction for the
10 programs being consolidated. This reduction will be partially cushioned by reducing overhead and
personnel costs in the BIA.
Funding for the facility repair and roads construction programs will be partially deferred to the
out-years due to the postponable nature of these initiatives, but will still be an increase over the 1981
levels.

Key Facts About the Program
In order to begin to streamline and simplify the delivery of Indian programs, the Administration is
proposing to consolidate the following ten categorical programs into a Consolidated Tribal
Government Program:
Agriculture Extension; Johnson-O'Malley Education Assistance; Adult
Education; Community Fire Protection; Direct Employment; Adult Vocational Training; Self
Determination Grants; College Student Assistance; Indian Action Teams; and Housing. This
approach will offer each tribe the option of selecting, within the overall budget, the amounts and
types of programs the tribes or the BIA will operate on the reservation during any budget year. If the
tribe chooses to operate the programs, it may do so under a new grant mechanism that will be
established through regulation.
PL 93-638, the "Indian Self-Determination and Education Assistance Act" requires that the tribe have
the option of contracting with the Bureau to operate its programs on reservation or having the Bureau
continue to operate or resume operations of such programs. This option is to be retained.

209

Fish and Wildlife Service Reductions
Agency: Department of the
Interior

Functional
Code: 303

Budget Reform
Criterion: 6

Funding
CARTER BUDGET:
Budget Authority
Outlays
REESTIMATES & ADJUSTMENTS:
Budget Authority
Outlays
PROGRAM CHANGES
Budget Authority
Outlays
REAGAN BUDGET:
Budget Authority
Outlays

(S in millions)
1984
1983

1981

1982

437
431

463
440

508
456

0
0

-10
-7
427
424

1985

1986

534
478

559
494

584
523

-24
+ 17

-31
+9

-38
+5

-43
-11

-66
-65

-60
-60

-60
- 60

398
380

424
413

443
427

461
439

481
452

Program Description
The Fish and Wildlife Service (FWS) operates 415 wildlife refuges containing 84 million acres; 99 fish
hatcheries and related production and training facilities; 38 research laboratories and stations; and
funds numerous planning and monitoring activities. Both the 1981 and 1982 requests include
increases to plan and operate the new refuges authorized by the 1980 Alaska Lands Act. The FWS
administers the endangered species program, and the disbursement to the States in 1982 of $145
million in Federal excise taxes collected on fish and wildlife sports equipment

Proposed Change
•

Endangered species program is reduced by $8 million: ending the funding for the small
grant program to States ($4 million) and reducing funds for listing new species, law
enforcement and species recovery plans. $17 million remains for species recovery actions,
stopping illegal trade and to review currently listed species.

•

Reduces program of permit review, independent planning, and biological services by the Fish
and Wildlife Service for projects undertaken by other Federal or federally-assisted agencies
or States by about 20 percent ($10 million) and ends support to universities to carry out
similar planning and research activities ($3.5 million).

•

No funds are requested for anadromous fish grants to the States ($3.5 million).

•

Construction is reduced by $19 million in 1982 leaving $7.6 million. A 1981 rescission is
proposed for a new fish laboratory which would have required additional funding in 1982
and which was of relatively low priority.

•

Other reductions in technical assistance, law enforcement, fishery resources and wildlife
management total about $20 million in 1982.

Rationale
•

Endangered species program should be refocused primarily on species that can be saved, not
those whose demise is caused by fundamental environmental or other unavoidable changes.
Stricter definitions of species are needed; it is not necessary to save "populations" within
species when the species itself is not endangered. State grants often support efforts to save
species populations threatened only in a specific state. We believe the States themselves
should support such efforts. Planned reductions support this policy.

•

Fish and wildlife planning and commenting program is duplicative of efforts that must be
carried out under the National Environmental Policy Act by the agency actually constructing
the project.

210

Key Facts About the Program
•

Grants to States for fisheries and wildlife projects financed from federally collected revenues
are not reduced, providing a $21 million increase in 1982 over 1981.

•

Acquisition of wetlands under the Migratory Bird Conservation Account, especially in
estuaries, has not been reduced, even while other land acquisition programs are under a
moratorium.

•

Operation of refuges is reduced by $800 thousand, or less than 2 percent on a base of $37
million. This still allows a planned increase over 1981 of $2.7 million for maintenance.

•

Operation of hatcheries is reduced by $550 thousand, or about 2 percent on a base of $27
million. This still provides for a $2.3 million increase over 1981.

•

The $3.5 million requested in the Carter Budget for payment to the State of Alaska to
support subsistence planning required by the 1980 Alaska Lands Act is requested under the
Office of the Secretary heading and therefore shows as a reduction in the Fish and Wildlife
Service.

211

Improved Targeting of Recreation and Conservation Expenditures
Agency: Department of the
Interior

Functional
Code: 303

Funding
1981
CARTER BUDGET:
Budget Authority
Outlays
REESTLMATES & ADJUSTMENTS:
Budget Authority
Outlays
DECREASES
Budget Authority
Outlays
INCREASES
Budget Authority
Outlays
REAGAN BUDGET:
Budget AuthorityOutlays

994
1,247

-316
-103
—

677
1,144

1982

Budget Reform
Criterion: 6
(S in millions)
1984
1983

1985

1986

1,300
1,267

1,337
1,369

1,453
1,391

1,448
1,459

-68
-60

-63
-75

-139
-75

-98
-143

-593
- 290

-512
-239

-454
-428

-468
-496

-624
- 564

+ 105
+ 60

+ 105
+ 114

+ 105
+ 111

+ 105
+ 108

720
1,017

825
1,082

925
980

951
981

831
831

1.209
1,247

Program Description
The Department of the Interior, through the National Park Service operates 327 park and historic
areas comprising about 72 million acres. In addition, Interior administers three major grant-in-aid
programs: the Land and Water Conservation Fund (LWCF), the Historic Preservation Fund and
Urban Park grants for assisting States and localities in acquiring and developing recreation areas and
facilities and administering State historic preservation programs. These grant programs, some
technical assistance and planning activities, and coordination of Federal recreation land acquisition
funded by the Land and Water Conservation Fund, was provided through the Heritage Conservation
and Recreation Service (HCRS).
The Carter 1982 program provided $564 million for national parks operations and construction; $17
million for HCRS administration and technical assistance; $32.5 million for the Historic Preservation
Fund; $75 million for Urban Park grants; $185 million for LWCF state grants; and $335 million for
Federal land acquisition and administration of LWCF.

Proposed Change
Termination of the three grant programs through rescission of $188 million in 1981 and withdrawal of
request for 1982. The National Trust for Historic Preservation would continue to receive the $4.7
million requested in the Carter Budget. A moratorium on Federal conservation land acquisition is in
place, allowing a $105 million rescission in 1981 and a further $290 million reduction in the 1982
request for Land and Water Conservation Fund. Rescission of $15.5 million for the Cumberland Gap
Tunnel is requested to avoid wasteful spending on a project now estimated to cost over $150 million
and provide primarily aesthetic benefits. Reducing technical assistance to states and localities and
reducing overhead by eliminating HCRS as a separate organization will reduce spending by $5
million.
A $525 million multi-year initiative to restore and improve existing national parks will be begun in
1982, with an initial $105 million request. This initiative will be funded out of the Land and Water
Conservation Fund.

Rationale
This proposal is an integral component of the Administration's overall effort to impose fiscal restraint
on Federal programs. Grants to States and localities for recreation and historic preservation primarily
produce local benefits. Such activities should compete for local tax dollars on the same footing as
other local services and are low priority for Federal funding. Existing tax treatment is estimated to
result in S100 million in tax expenditures for historic structures in 1982.

212

The $45 million requested for Federal land acquisition and administration in 1982 will be used to pay
court awards on lands already taken or condemned by the United States and for emergency purchases.
The $4.7 million requested for the National Trust for Historic Preservation is necessary because of the
Trust's unique relationship to the Federal government.
The park restoration and improvement initiative is an investment strategy in the nationally significant
resources held in trust for all Americans by* the National Park Service. These resources have been
shortchanged as funds have been focused on expanding the number and types of units in the national
park system. Recent GAO reports have documented some of the problems resulting from the lack of
sufficient maintenance and repair funds.

Key Facts About the Program
URBAN PARKS:
The Urban Park program was enacted in 1978 to complement other proposals of the Carter
Administration's Urban policy, most of which was never enacted by the Congress. This program has
funded such things as: local park maintenance planning, local park rehabilitation projects, and other
projects in selected urban areas.
HISTORIC PRESERVATION FUND:
Through the efforts of States and localities, the number of properties eligible for inclusion on the
National Register of Historic Places has grown tremendously in the past few years: Interior estimates
that over 240,000 structures are currently listed on the Register; 81,000 properties would be
documented for State registration in 1982 under the Carter Budget proposal; and an estimated 5,000
new areas, including historic districts, would have been added to the Register in 1982.
Most Register listed buildings are not nationally significant; in fact many are only locally significant.
Registration will continue, but at a slower pace, if each State provides the total funding of its
program. Only about $8 million of the Fund was to be used to help restore buildings listed in the
National Register, the rest was to pay salaries and expenses of the States' programs.
STATE RECREATION GRANTS OF THE LAND AND WATER CONSERVATION FUND:
This program has provided over $2.8 billion to States since its inception in 1965. Its major purpose,
to provide increased recreation opportunities, is a comparatively low priority. As an example, in 1978,
60 percent of the funding went for development projects, which included: 815 projects with tennis
courts; 213 projects with swimming pools; 62 projects with skating rinks; and 55 projects with golf
courses.
MORATORIUM ON FEDERAL LAND ACQUISITION:
The Federal government owns more than 760 million acres of land, more than one-third of the
United States. State and local governments hold a small but growing share (6 percent) bringing
public ownership to 40 percent. The Federal government has acquired over 2 million acres of land
through the Land and Water Conservation Fund since 1965.
The moratorium will provide for a policy review of planned acquisition, boundaries of existing park
areas, and the planning of an aggressive land exchange program to round out the Federal estate.
The GAO has been very critical of land acquisition practices. For example, in January 1981 GAO
recommended that lands bought for the Lake Chelan National Recreation Area be sold back to their
original owners.
NATIONAL PARK RESTORATION AND IMPROVEMENT PROGRAM:
This initiative will focus on five major areas:
correcting health and safety problems; cyclic
maintenance repair and rehabilitation; historic resources preservation; natural resources preservation
and major capital improvements.

213

Mineral Leasing Acceleration
Agency: Department of the
Interior

Funding
1981
CARTER BUDGET:
Budget Authority
Outlays
REESTIMATES & ADJUSTMENTS:
Budget Authority
Outlays
PROGRAM CHANGES
Budget Authority
Outlays
REAGAN BUDGET:
Budget Authority
Outlays

Budget Reform
Criterion: 4

Functional
Code: 306,953
1982

($ in millions)
1984
1983

1985

1986

-8.090
-8,090

-10,409
-10,409

-10.537
-10,537

-10,447
-10,447

-10,457
-10,457

-1.673
-1,673

-492
-492

-284
-284

-391
-391

-507
-507

-608
-608

-250
-250

-900
-900

-1,900
-1,900

-3,100
-3,100

-3.500
-3,500

-3,500
-3,500

•10,013
•10,013

-11,801
-11,801

-12,721
-12,721

-13,938
-13,938

-14,464
-14,464

-14.565
-14,565

Program Description
Rights to oil and gas on the Outer Continental Shelf (OCS) are leased by competitive sealed-bid
auctions held in accordance with the leasing schedule of June 1980.
Onshore oil and gas, coal, oil shale, geothermal resources, and other minerals are leased by a variety
of methods under several legislative authorities. The Carter Budget anticipated two coal lease sales in
FY 1982, three in FY 1983, and four in FY 1984. It also planned to hold one competitive oil and gas
lease sale in the National Petroleum Reserve in Alaska during FY 1982, to offer four prototype oil
shale leases in FY 1983, and to hold the first oil shale lease sale under a permanent leasing program
in FY 1985.

Proposed Change
The revised Interior budget proposes additional funds and personnel for the Bureau of Land
Management and the Geological Survey to accelerate mineral leasing. The OCS leasing program will
be revised in accordance with the OCS Lands Act. A major objective will be to shorten the time
period required to start exploratory drilling in all OCS areas. Efforts will also be made to shorten the
lengthy sale preparation process.
Onshore leasing will be accelerated by holding two sales in the National Petroleum Reserve in Alaska
in 1982, beginning regular oil shale leasing under a permanent program by 1984, and beginning to
simplify administratively the coal leasing process to achieve significantly expanded leasing by 1983 if
possible, but no later than 1984.

Rationale
The acceleration of leasing sought by the President will significantly increase our knowledge of
domestic energy and nonenergy mineral resources.
Domestic production will be significantly
increased in the longer term, thus contributing to economic growth. The acceleration will increase the
proprietary receipts of the government and help to reduce the budget deficit, and also increase the
shared revenue payments to States for onshore activities.

Key Facts About the Program
Revisions of the OCS oil and gas leasing schedule must be done in accordance with procedures
specified in section 18 of the OCS Lands Act. Compliance with the required procedures takes
approximately a year to complete. The specific number, size, and location of OCS sales which will be
included in die revised OCS schedule will be determined as the program or schedule revision process
is carried out.

214

The current process for preparing individual OCS sales is a lengthy process of many administrative
steps. A number of sales on the June 1980 schedule would take more than 40 months to prepare.
The Administration's program proposes to streamline and shorten the sale preparation process through
more efficient methods of environmental impact statement preparation and parallel completion of
some pre-sale steps which are now done sequentially.
The current administrative process for preparing coal lease sales is also highly time-consuming and
cumbersome. The proposed program will streamline that process with the objective of assuring that,
while unnecessary or unproductive procedures are avoided, information is available for making leasing
decisions that adequately consider environmental values and the public's proprietary interests.
The proposed leasing acceleration will increase shared payments to States from mineral leaeing
receipts. Such pavments are expected to increase by S38 million in FY 1981, $70 million in FY 1982;
$167 million in FY 1983; $85 million in Fy 1984; $104 million in FY 1985; and $108 million in FY
1986. Alaska, Colorado, Wyoming, and New Mexico are expected to be the major beneficiaries.

215

Payment in Lieu of Taxes
Agency: Department of the
Interior

Functional
Code: 852

Budget Reform
Criterion: 1

Funding
1981
CARTER BUDGET:
Budget Authority
Outlays
REESTIMATES & ADJUSTMENTS:
Budget Authority
Outlays
PROGRAM CHANGES
Budget Authority
Outlays
REAGAN BUDGET:
Budget Authority
Outlays

1982

(S in millions)
1984
1983

1985

1986

103
108

0
0

0
.0

0
0

+45
+45

+ 45
+45

+45
+45

+45
+ 45

103
108

45
45

Program Description
The Carter Budget requested no appropriation in FY 1982 for the payment in lieu of taxes program.

Proposed Change
A payment in lieu of taxes program would be resumed in FY 1982. However, the new program is
contingent upon passage of new legislation to simplify procedures by which calculations are made,
eliminate the need to rely on state reports for basic information, and provide for a more equitable
system for making payments to local governments. A revised payment formula would net out all
revenue payments made to either the State or local governments.

Rationale
This program restructuring should eliminate extra unintended benefits that accrued when not all
revenues generated from Federal lands were offset against the in-lieu payment. It will also reduce
payment inequities that result from interstate differences in distribution of revenues. Currently states
can chose not to distribute all their mineral revenues to local units of government, thereby increasing
their PILT payment.

Key Facts About the Program
The Payment in Lieu of Taxes (PILT) Act was passed in October 1976. The Act's intent was to
compensate local units of government for tax revenues foregone due to the existence of Federal lands
within the local taxing jurisdiction.
In 1978 the Comptroller General issued an opinion that said that for purposes of Section 1 PILT
payments, money was not to be considered "received" by a local government and therefore not
deducted from the 75 cents/acre payment, if it (1) went direcdy to a special purpose unit of
government, i.e., a school district, or if (2) it passed through a local unit of government on its way to
a special purpose district. The problem with this decision is that in both of these cases the funds not
"received" by a local unit of government were being used to aid general government services as
envisioned by PILT.
The 1979 GAO report on the PILT program found many procedural irregularities in the
administration of the program as well as substantive concerns that the intent of the Act was not being
met. A major concern was that in many cases the PILT payment exceeded what a comparable tax
payment would be.
The proposed program for economic recovery includes $45 million in the FY 1982 budget for
resumption of a payment program contingent upon passage of new legislation to revise the payment
formula. The intent of a revised payment formula is to target funds toward States with large amounts
of Federal acreage that receive little or no shared revenues.
This program reform would substantially reduce the total cost of the program while continuing to
provide assistance to those local governments with the greatest needs.

216

Surface Mining Regulation and Reclamation
Functional
Code: 302

Agency: Department of the
Interior

Funding
CARTER BUDGET:
Budget AuthorityOutlays
REESTIMATES & ADJUSTMENTS:
Budget Authority
Outlays
PROGRAM CHANGES
Budget AuthorityOutlays
REAGAN BUDGET:
Budget Authority
Outlays

1981

1982

175
158

246
134

—
—

Budget Reform
Criterion: 6
(S in millions)
1984
1983

1985

1986

266
177

285
242

303
271

320
299

-7
-7

-12
-12

-18
-18

-23
-23

-2
-2

-67
-23

-54
-32

-70
-48

-85
-39

-104
-61

173
156

180
111

205
138

203
182

200
214

193
215

Program Description
Programs include monitoring of State surface mining regulatory activities, review of mine plans on
Federal lands, regulation of coal surface mining in States which choose not to submit their own
programs, assistance to university mineral institutes and reclamation of abandoned mine lands by
USDA, Interior, and the States. The Carter 1982 Budget requested a decrease of $8 million from
1981 levels in regulatory programs, reflecting the continuing transition to a larger State role.
Reclamation program request increased $79 million over 1981.

Proposed Change
Regulatory programs are cut a further $20 million. Funding for assistance to 31 Mineral Institutes is
eliminated (-$9.6 million).
Reclamation programs decrease by $47 million from the Carter Budget, but still increase $33 million
over 1981.
(S in millions)
Reclamation Programs
Carter
Reagan
1981
State Grants
29
100
70
Interior Projects
31
42
31
Rural Reclamation (USDA)
10
4
10
Other
12
10
10
Total
82
162
115

Rationale
Reduced funding for regulatory programs will minimize duplication with States and decrease
regulatory burden. The Mineral Institute program has been identified as a low priority program
which cannot be justified in the current climate of fiscal restraint.
State reclamation grants cut because of delays in eligibility due to court injunctions against State
action to seek Federal approval of regulatory programs, a prerequisite for reclamation grant awards.
Cuts in the Interior and USDA programs offset the increase over 1981 levels in State .grant funding.

Key Facts About the Program
REGULATORY PROGRAMS:
•

As part of the transition to State primacy (assumption by the States of the lead responsibility
for surface mining regulation), OSM's staffing levels will be reduced. The Carter Budget
recommended a 10% reduction in total OSM fulltime staffing and a 20% reduction in the
staffing for regulatory programs. The revised budget assumes a 23% overall reduction and a
36% reduction in regulatory programs

•

The revised budget assumes that 24 of the 27 coal-producing States will have primacy by the
beginning of fiscal 1982. The remaining 3 States elected not to submit permanent programs
by the March 30, 1980 deadline.

217

•

Monitoring of State program implementation is performed to assure consistency with the
provisions of the permanent State programs approved by the Interior Department.
Monitoring will include annual Federal inspections of a statistically valid sample of regulated
facilities. Approximately 17 percent of all facilities will be inspected. On the average, one
Federal inspection will take place for every 69 State inspections. The budget revisions will
accelerate the phase down of the Federal inspection program from the current level of 2
inspections per year of most facilities to the lower level required for monitoring.

•

To review mine plans on Federal lands, a major OSM responsibility, the agency will depend
as much as possible on analysis performed by State regulatory authorities and the review
process will be streamlined. Workload estimates for this function have also been reduced
since the Carter Budget was formulated.

RECLAMATION PROGRAMS:
•

Reclamation funding wall provide a 40 percent increase over 1981 level. Mix of spending
will alter; funding for States will increase significantly (141 percent) while funding for
Federal projects will be 14 percent lower than 1981.

•

Subject to appropriation, each State is eligible to receive 50% of the Abandoned Mine Fund
receipts colleted in the State once its regulatory and reclamation programs are approved.
The Carter Budget requested an amount approximately equal to the States' share for FY
1982. The proposed reduction reflects the fact that several States will not be prepared to
fully utilize reclamation grants until sometime in FY 1982 because they have been enjoined
from taking further action to seek approval by the Interior Department for their permanent
regulatory programs. Such approval is a prerequisite for eligibility for reclamation grants.

•

Reductions have been proposed for the reclamation programs administered by Interior (OSM
and the Bureau of Mines) and Agriculture (Soil Conservation Service) because the work
undertaken is very similar to that which will be carried out by the States. An exception to
this is OSM's emergency reclamation program, which will remain'at the 1981 level.

218

Youth Conservation Corps (YCC)
Agency: Department of the
Interior

Functional
Code: 302

Budget Reform
Criterion: 6

Funding
CARTER BUDGET:
Budget Authority
Outlays
REESTIMATES & AD JUSTMENTS:
Budget Authority
Outlays
PROGRAM CHANGES
Budget Authority
Outlays
REAGAN BUDGET:
Budget Authority
Outlays

(S in millions)
1984
1983

1981

1982

60
61

60
63

60
60

-38
-33

-60
-60

22
28

1985

1986

Program Description
YCC provides summer jobs on Federal and State lands for teenagers, ages 15-18. The 1981
appropriation and Carter 1982 request of $60 million were to fund 35,000 and 32,000 jobs
respectively. Interior and USDA each receives 35% of the funds and all States and territories receive
the remaining 30%.

Proposed Change
A $38 million proposed rescission wall eliminate 1981 funding for the summer programs run by
Interior, USDA, 22 states, and 5 territories, reducing enrollment to 8,800. State grant funds for 1981
have already been obligated to 28 states, D.C. and Puerto Rico. Funding for the program will be
completely eliminated in FY 1982.*

Rationale
Funding for the program is being eliminated because it is costly compared to other employment
programs, it is not targeted to the most needy populations, such as unemployed heads of households,
and the work accomplished is of relatively low priority. Participants are selected at random from
applicant rolls. Relatively few enrollees are underprivileged.
The work performed by the YCC is generally low priority conservation work. Visitor services at parks
and development and maintenance of recreation areas account for 45 percent of the work
accomplished.

Key Facts About the Program
•

In 1980, only 28% of YCC enrollees came from families with incomes of less than $10,000
and 42% came from families with incomes over $15,000. Participants largely (76%) lived in
rural areas and cities with populations under 50,000.

•

Participants receive 10 hours per week of environmental training and perform 30 hours of
conservation work, for which they are paid the minimum wage.

•

In the Federal YCC program, 38% of enrollees live at work camps 7 days per week while
working 5 days. Recreation and additional environmental training are provided on the
weekends.

Termination of funding for a related program, the Young Adult Conservation Corps, is proposed in
the Labor Department.

219

Department of Justice

221

Department Employment
Agency: Department of
Justice

Functional
Code: 751,752

Funding
1981
CARTER BUDGET:
Budget Authority
Outlays
REESTlSlATES & ADJUSTMENTS:
Budget Authority
Outlays
PROGRAM CHANGES:
Budget Authority
Outlays
REAGAN BUDGET:
Budget Authority
Outlays

1982

Budget Reform
Criterion: 8
(S in millions)
1984
1983

1985

1986

2,175
2,170

2,317
2,294

2.377
2,341

2,473
2,437

2,570
2,533

2,672
2,624

-35
-32

-68
-70

-156
-146

-283
-272

-411
-399

-544
-547

2,140
2,138

2,249
2.224

2.221
2.195

2,190
2,165

2,159
2,134

2,128
2.077

Program Description
The Department provides basic government services of law enforcement and litigation support for the
Federal government. Of the 54,173 employees in the 1981 Carter budget, 78% are in law enforcement
functions while 18% provide legal services.

Proposed Change
The Reagan budget proposes employment levels which are 2.0% and 3.9% below the respective 1981
and 1982 proposed Carter end-of-year employment levels. The major Feductions were distributed
among the following bureaus:
Full-time end-of-year employment
1982
1981
Federal Bureau of Investigation
Drug Enforcement Administration
Bureau of Prisons
United States Attorneys and Marshals
Immigration and Naturalization Service
Other
Total

—

173
117
334
350
152
1,126

—

174
249
520
750
471
2,164

Rationale
Full-time permanent staffing under these recommendations for the entire Department would be only
2% below the actual end of 1980 levels and 15% above the staffing levels of a decade ago, in 1972.
Employment reductions in the Department of Justice are targeted at lower priority programs of state
and local assistance, programs with insignificant impact, and programs that can be carried out by
other public or private bodies.
Dmg Enforcement Administration (DEA). Since 1974, DEA employment has remained essentially
stable at 4,000. Within that staffing level the agency has shifted its resource allocation in response to
the changing nature of drug traffic.
The State and local task force program, now operating in 20 cities, would be substantially reduced.
Task forces do not play a significant role in Federal drug priorities, accounting for only 18% of the
arrests of high level violators. The drug enforcement capacity of local governments has benefitted
from several years of DEA training, lab analyses, and joint investigations.
Special funding for both DEA and selected northeastern cities in 1981 and 1982 to deal with Southwest
Asian heroin is eliminated. Although the supply of Southwest Asian heroin in the United States is
increasing, the total supply of heroin continues to decrease. The Compliance program was also
reduced to force further targeting of investigation to the most egregious cases of drug diversion.

223

Bureau of Prisons. Federal prison staff grew 72% from a level of 5,640 in 1970 to 9,742 in 1980 owing
primarily to the opening of new prison facilities which were built to address overcrowded conditions.
However, with the 25% decrease in the prison population from 30,000 in 1977 to 24,000 in 1980, the
closing of McNeil Island Penitentiary, and the phasing down of Leavenworth and Atlanta, the Federal
Prison System can sustain personnel reductions without threatening the health and safety of inmates.
U.S. Attorneys, Marshals and Trustees. The Reagan budget continues the transfer of responsibility to
local authorities for prosecution in, and court support of, the District of Columbia's Superior Court
and also to parties other than the U.S. Marshals for the service of process in private lawsuits.
The U.S. Trustee program of bankruptcy administration is eliminated since the Judiciary's performance is ongoing in this area and the Department's involvement in administration is inappropriate
since the Attorney General is one of the most frequent parties to bankruptcy cases.
Further employment reductions are gained by reducing the security provided to judges during
non-dangerous civil proceedings. Deputy Marshals are now required to attend all trials in 78 of the
94 judicial districts.
Immigration and Naturalization Service (INS). Full-time permanent employment in INS grew 45%
between 1971 and 1980 from a level of 6,819 to 9,948, while employment in the rest of the Department
grew 21%. The Administration realizes that the immigration law is difficult to enforce and that
immigration policy needs to be reassessed, but the Administration also believes that INS has failed to
optimize the use of its resources within the current policy and legal framework. Therefore, the
employment reduction was targeted to programs that appear to have either low pay-off or a
disproportionate allocation of resources given the level of risk involved. The reductions were targeted
to the following areas: airport inspections where .1% of alien border crossers are denied entry;
investigations and status verification; and several application procedures in the adjudication program.

Key Facts About the Program
Department of Justice staffing grew 25% from 1971 to 1980. The law enforcement component of the
Department has increased in staff by 8.3% since 1975. Since Federal law enforcement resources
should not be viewed as a substitute for local efforts, these resources have been targeted increasingly
to Federal law enforcement priorities that by their nature exceed the capability and jurisdiction of
local forces.
FULL-TIME END-OF-YEAR EMPLOYMENT
1972
Actual

1980
Actual

4,599

6,272

6,215

5,820

19,918

18,150

18,230

18,429

Drug Enforcement Administration

2,745

4,032

3,851.

3,865

Immigration and Naturalization Service

7,374

9,948

9,739

9,471

Bureau of Prisons

6,824

9,742

9,732

9,663

Other

4.138

5.330

5.280

5.070

45,598

53,478

53,047

52,318

U.S. Attorneys and Marshals
Federal Bureau of Investigation

TOTAL

224

1981

1982

Juvenile Justice and Delinquency Prevention Program Termination
Agency: Department of
Justice

Functional
Code: 754

Funding
CARTER BUDGET:
Budget Authority
Outlays
REESTLMATES & AD JUSTMENTS:
Budget Authority
Outlays
PROGRAM CHANGES:
Budget Authority
Outlays
REAGAN BUDGET:
Budget Authority
Outlays

Budget Reform
Criterion: 7
(S in millions)
1984
1983

1981

1982

103
120

141
127

135
141

-1
-1

-138
-19

102
119

3
108

1985

1986

146
187

156
186

167
198

-133
-98

-146
-187

-156
-186

-167
-198

2
43

0
0

Program Description
Juvenile Justice and Delinquency Programs (JJDP) provide formula and discretionary grants to State
and local governments and to private non-profit corporations for the following primary objectives: 1)
removal of status offenders (juveniles who commit acts that would not be offenses if committed by
adults) and non-offenders 'from juvenile detention and correctional facilities; 2) removal of all
juveniles from adult lock-ups and jails; and 3) prevention of delinquency and meeting the needs of
the serious and violent offender.

Proposed Change
Services currently provided through JJDP programs would be provided under broader authorities of
programs proposed for consolidation into a social services block grant. Thus, the Administration
proposes that JJDP activities be carried out by the States in the context of the block grant. This shift
in delivery mechanism would eliminate Federal bureaucratic red tape and unnecessary State and local
administrative costs, and make relatively more funds available for real program needs.

Rationale
Merging JJDP activities into a social services block grant is part of the effort to return management of
health and social service programs to States and localities. The goals of the JJDP programs are
laudable, and the Administration recognizes the progress made by many States in achieving some of
the most important program objectives. States and localities are best able to assess the needs of their
juveniles and to determine what programs are needed to prevent delinquency and deal with serious
and violent offenders. States and localities know best how to maintain the reforms and achievements
they have accomplished. Federal direction and control of juvenile justice programs are not needed.
Federal bureaucrats have no special knowledge of how juvenile delinquents can be deterred from
further delinquent acts or where problem youth should be housed.
Allowing States and localities to provide JJDP services through a social services block grant will
provide States with the flexibility they need and allow them to set their own program priorities.
Unproductive administrative time spent preparing plans and shuffling paperwork to meet Federal
regulations and guidelines will be eliminated. Because the responsibility for program goals and
management will be shifted to States and localities, costs will be lower, response to the unique needs
of specific communities will be greater, and communities and families will increase their involvement
in planning and implementing programs which affect their youth.

Key Facts About the Program
Federal funding for this program has helped the States and local communities achieve many desirable
institutional reforms and demonstrated more effective, and often less costly, alternatives for dealing
with juvenile offenders. We anticipate that State and local governments will continue with these
activities that are more effective and less costly than traditional approaches. Local communities,
moreover, are best able to judge the most effective programs for their youth and to focus on juveniles
with greatest needs. For example:

344-211

0-81-8

•

Between 1975 and 1977, the rate of detention of status offenders has decreased by 50% and
the number of juvenile court cases by 4% as more effective and often less costly alternatives
were developed.

•

Project New Pride, a successful project providing non-residential community-based
treatment for juvenile delinquents with a history of serious offenses, is being replicated in ten
locations. The program was started in Denver where more than 70% of Project New Pride
youths have been placed in jobs; their rearrest rate is one-third the rate of the unemployed
clients. The program costs about $4,000 per youth per year compared to a cost to a local
community of $24,00 to $43,000 for incarcerating a juvenile.

•

The Restitution by Juvenile Offenders and Alternatives to Incarceration Programs, begun in
1978, has resulted in over 17,000 youth paying more than $1 million in cash restitution,
working more than 190,000 hours of community service, and performing more than 4,157
hours of direct service to crime victims. Over 85% of referred youth have no subsequent
contact with juvenile courts.

226

Department of Labor

227

Black Lung Disability Trust Fund
Agency: Department of
Labor

Budget Reform
Criterion: 1

Functional
Code: 601

Funding
1982

($ in millions)
1984
1983

-922
275
-647

-770
292
-478

-711
321
-390

-682
341
-341

-812
364
-448

-849
379
-470

130

127

294

437

272

378

354

353

382

469

-487

-100

306

371

271

1981
CARTER BUDGET:
Outgo
Income
Deficit
REESTEVIATES & ADJUSTMENTS:
PROGRAM CHANGES:
REAGAN BUDGET:
Deficit (-)/Surplus

1985

1986

Program Description
Black Lung benefits are paid to coal miners (or their survivors) who have been determined under
loose criteria in the law to have been disabled by Black Lung disease. When a mine operating
company is identified as responsible for the disease, it is responsible for paying the benefits; otherwise
the Government pays.
The Black Lung Disability Trust Fund was established in 1977 to shift the fiscal responsibility for
Black Lung benefit payments from the Federal Government to the coal industry. The fund is financed
primarily by a coal excise tax of 50 cents per ton on underground-mined coal and 25 cents per ton on
surface-mined coal. Additional funds come from reimbursements from coal mine operators for interim
benefit payments made by the fund before the operator was found liable and advances from Treasury
when liabilities exceed income. Such advances are repayable with interest.

Proposed Change
The reduction in advances to cover trust fund deficits identified above will be achieved by a
legislative overhaul of the Black Lung program. The objective will be to eliminate questionable claims,
thus reducing trust fund oudays to a level where the coal industry can finance the program with
reasonable tax increases without drawing on the Treasury.
There are potential savings that could be gained by the tightening up of the program's eligibility
requirements. Restoring the program to its original purpose — to provide benefits to those certifiably
disabled by Black Lung disease — would result in outlay reductions without harming legitimate
beneficiaries..

Rationale
The deficit of the trust fund has been increasing at an alarming pace. Of the $792 million expected to
be expended from the fund in 1981 only $275 million will be covered by revenues received from the
coal tax. Currendy the trust fund is one billion dollars in debt and will be $1.5 billion in the red by
the end of 1981. Within a decade, the fund will be over $7 billion in deficit if changes are not made
to the present law.
A recent GAO sampling of eligibility certifications found that an astonishing 88% of all the claimants
certified as eligible were certified, in accordance with the requirements of law, either without proof
that the miner was permanently disabled or without proof that a disability resulted from Black Lung
disease.

Key Facts About the Program
•

Average monthly benefits: $425

•

Beneficiaries, 1982 estimates: 206,400

229

•

Claims filed before June 30, 1973, and decided by Social Security Administration paid from
U.S. Treasury, general fund.
— 1982: 370,000 beneficiaries $1.1 billion of payments

Eligibility Requirements
•

Total disability - inability to do work comparable to mine work previously performed.

•

Pneumoconiosis - chronic dust disease of the lung arising out of employment in a coal mine.

•

Five presumptions:
— Miner who worked 10 years in mine and died from respirable disease presumed to have
died from Black Lung (rebuttable).
— Miner who worked 10 years in mine and has Black Lung presumed to have contracted
disease in mine (rebuttable).
— Miner who has chronic dust disease diagnosed by (a) x-ray showing one centimeter lung
opacity or (b) biopsy or autopsy showing massive lesions or (c) equivalent other
diagnosis method is presumed to be totally disabled by (or to have died from) Black
Lung (irrebuttable).
— Miner who worked 15 years in mine and has x-ray not showing one centimeter lung
opacity but submits other evidence of respiratory or pulmonary impairment presumed to
be totally disabled by (or to have died from) Black Lung (rebuttable).
— Survivor of miner who worked 25 years in mines before June 30, 1971, and died before
March 1, 1978, entitled to benefits unless it is established that he was not partially or
totally disabled by Black Lung.

Evidence rules (in law)
•

DOL must accept x-ray interpretation of any qualified radiologist (unless fraudulent)

•

Negative x-rays alone not sufficient to prove absence of Black Lung.

•

Widow's affidavit sufficient to establish that miner totally disabled by or died from Black
Lung, where there is no other medical or relevant evidence.

230

CETA: Employment and Training Grant Consolidation
Budget Reform
Criterion: 7

Functional
Code: 504

Agency: Department of
Labor

Funding
1982

(S in millions)
1984
1983

2281

839 2/
875
3995

766 2 /
875
3922

793
875
3949

2281
790
_875
3946

2281
787
875
3943

2281
784
875
3940

2156
799
932
3887

2167
797
992
3956

2281
793
868
3942

2281
790
875
3946

2281
787
875
3943

2281
784
875
3940

-856
-670

-1074
-892

-1263
-1094

-1452
-1290

-1640
-1487

3156
839
3995

2300
766
3066

2875

2683

2491

2300

3088
799
3887

2489
797
3286

3051

2852

2653

2453

1981

1985

1986

CARTER BUDGET:
Budget Authority:
General Grant^
Summer Program
Other Youth Grants
TOTAL
Outlays:
General Grants
Summer Program
Other Youth Grants
TOTAL
REESTLMATES AND ADJlUSTMENTS:
Budget Authority
Outlays
PROGRAM CHANGES:
Budget Authority
Outlays
REAGAN BUDGET:
Budget Authority:
General Grant^
Summer Program
TOTAL
Outlays:
General Grant^
Summer Program
TOTAL
17

—

Includes Title I I B - C general employment and training grants to States and localities as well as statutory set-asides for Native
American and migrant farmworker programs.
$40 million of 1981 summer program was deferred by President Carter into 1982 to provide funding needed to keep participant
levels in 1981 and 1982 in the range actually achieved by the 1979 and 1980 programs.
For comparison purposes, the Reagan Budget lines for general grants include 1981 Other Youth Grants and residual outlays in
1982 and 1983 from the youth programs.

Program Description
Programs. Title II-B,C and related set-asides are the core of the CETA program, providing funds to
CETA prime sponsors for a wide variety of training and employment activities chosen at the
discretion of the prime sponsors. The Summer Youth Employment Program (SYEP) provides
part-time summer jobs for disadvantaged youth. Other youth grant programs, begun in 1977 as part
of the Carter economic stimulus plan, provide funds to prime sponsors for II-B,C-type services to
youth. Authorization of appropriations for these Carter youth programs expired in 1980; 1981 funding
is provided by the continuing resolution.
Carter Budget. The January budget continues Title II-B,C at current resources levels, maintains the
SYEP in both 1981 and 1982 at approximately the 1979 and 1980 participant levels, and consolidates
the other youth programs (the Youth Employment and Training Program - YETP, and the Youth
Community Conservation and Improvement Projects - YCCIP) in a reproposed 1981 youth initiative
with S250M in additional BA. Only current services funding for the initiative-affected programs is
included here. (See separate sheet on "Youth Initiative").

Proposed Change
Do not seek legislation to extend YETP and YCCIP authority in 1982. Instead, combine these
programs with the Title II-B,C program and increase the II-B,C request so that total outlays in 1982
equal about 80% of the Carter Budget level of the three programs combined.
In 1983, consolidate the summer youth employment program with II-B,C;

231

Reduce the consolidated programs gradually through 1986.
Prime sponsors will be able to alter service or client mix under the consolidation. After allowing for
savings due to reduced administrative costs, about 450-480 thousand years of service would be
available in 1982, a reduction of about 120-150 thousand years of service from the Carter Budget,
with additional reductions of about 30-50 thousand years of service each year thereafter. These
reductions can all be accomplished through attrition; layoffs will not in general be necessary. Prime
sponsors, when relieved of die pressure to spend the large amount of Federal grants now provided,
will be able to concentrate on designing effective training programs, reducing the present practice of
emphasizing work experience programs which are easy to mount but ineffective in increasing the
long-term employment and earnings of participants.

Rationale
Categorical grants should be consolidated wherever and whenever feasible. The original purpose of
the Comprehensive Employment and Training Act was to block up a myriad of separate training and
employment programs into one grant that State and localities could use to carry out programs
designed to meet the particular needs of their citizens. This intent has been increasingly thwarted by
the enactment of additional categorical programs in 1974, in 1977, and in* 1978. In some cases, this
fragmentation has led to unworkably small grants — several prime sponsors in 1980 received YCCIP
grants of less than $50,000.
There are no activities in the youth programs which are not also authorized in Title II-B,C — the
authorities are entirely overlapping.
Consolidating four categorical programs into one (in addition to the termination of the two Public
Service Employment programs — see separate paper) would greatly reduce the Federal administrative
burden on prime sponsors. It would also free up local staff to improve the quality and effectiveness of
CETA programs in providing participants with the training and skills necessary for them to find
unsubsidized private sector employment. Gradual reduction of the total grant amount will encourage
prime sponsors to utilize only the most cost-effective approaches — usually on-the-job-training — in
their overall programs.

Key Facts About the Program
•
•

•

II-B,C already serves youth
— 48% of participants under 21 in 1980
II-B,C serves youth more efficiently than YETP or YCCIP (1980 data):
— Entered emplovment rates for 21 or younger:
II-B,C - 27%
YETP - 17%
YCCIP - 18%
— Almost 100,000 youth entered employment from II-B,C, about 37,000 more than from
YETP and YCCIP combined.
Work experience no help to youth after program is over
— Post-program annual income gains:
•
OJT: c. $850.
•
classrooom training: c. $350.
•
work experience: $0 to negative.
•
both OJT and classroom training gains increases in 2nd year; work experience declines.
— Service mix (1979 and 1980):
II-B,C: 61% classroom or OJT
•
39% work experience and other
•
YETP and YCCIP: 12% classroom
66% work experience
22% transition sendees or other
•
Summer Youth: 6% classroom
94% work experience
232

CETA: National Programs
Functional
Code: 504

Agency: Department of
Labor

Funding
CARTER BUDGET:
Budget Authority
Outlays
REESTIMATES & ADJUSTMENTS:
Budget Authority
Outlays
PROGRAM CHANGES:
Budget Authority
Outlavs
REAGAN BUDGET:
Budget Authority
Outlays
17

Budget Reform
Criterion: 6
($ in millions)
1983
1984

1981

1982

92 ly
122

151
151

-108
-100
43
51

—

9217
122

1985

1986

151

-110
-110

41
41

Excludes $40 million in 1980 resources deferred into 1981.

Program Description
The CETA National Programs provide training and other employment-related services to groups with
disadvantages in the labor market through contracts with national level organizations that serve these
groups. The 1982 Carter Budget was $20 million above the current services level.

Proposed Change
The revised budget reduces the national programs activity to approximately on-third of the current
service level. This reduction will reduce the number and variety of discretionary training grants
awarded national organizations in any one year.

Rationale
This proposed change is part of the general effort to impose fiscal restraint on other programs of
national interest. The justification for the level of resources currently provided for these discretionary
training contracts is weak. Congress has been critical of these programs because contracts have been
awarded or continued with vague statements of what is to be accomplished. Awards have not been
based on competition among possible contractors. Prior accomplishments have not been evaluated
before renewing contracts. Continuation of these programs at their previously high funding levels is
thus not justified in times when overall Government spending must be reduced.

Key Facts About the Program
Congressional Evaluations:
•

The House Government Operations Committee, 1980 three found:
—

Contracts awarded with vague accomplishment statements

— No evaluations of contracts
— Contracts not competed
•

House action on 1981 budget: cut $20 million because Department could not explain what
use would be made of funds.

Groups Getting Contracts:
•

Community-based organizations such as OIC and SER ($10M in 1981).

•

National Alliance of Business and AFL-CIO's Human Resource Development Institute
($25M in 1981).

233

•

Union sponsored training and outreach programs ($38M in 1981).

•

Other groups including:
— offenders ($3M)
— displaced homemakers ($1M)
— handicapped workers ($3M)
— older workers ($6M)
— apprenticeship initiatives ($5M)
— trade adjustment training ($8M)
— women's programs ($2M)

1982 Distribution:
•

Not yet determined by Department of Labor.

234

CETA: Public Service Jobs
Agency: Department of
Labor

Funding

Functional
Code: 504,603

•
1981

CARTER BUDGET:
Budget Authority
Outlays
REESTLMATES & ADJUSTMENTS:
Budget Authority
Outlays
PROGRAM CHANGES:
Budget Authority
Outlays
REAGAN BUDGET:
Budget Authority
Outlays
V

1982

Budget Reform
Criterion: 4
(S in millions)
1983
1984

3.134
3,383

4,084
3,905

4,276
4,083

—
—

-149
-535
2.98517
2,848

-4,558
-3,545
-474 1 '
360

1985

4,587
4,408

4,946
4,762

—
-. -

—
—

-4,222
-4,073

-4,561
-4,408

-4,931
-4,762

54
10

1986
5,341
5,143

-5,341
-5,143

Includes $607 million excess title II-D funds deferred into 1982 and used to reduce budget authority needs of continuing CETA
programs.

Program Description
The two CETA Public Service Employment (PSE) programs provide economically disadvantaged
unemployed persons with subsidized jobs with State and local governments intended to lead to
unsubsidized jobs in the private sector. The Carter Budget would have supported an average of
313,000 such jobs in 1981 and 340,000 in 1982.

Proposed Change
The Administration proposes to phase out the PSE programs by the end of fiscal year 1981. To
accomplish this the Secretary of Labor has imposed a hiring freeze on both PSE programs and is
developing a phase-down plan to ensure that individuals holding CETA-funded jobs are no longer
paid with Federal resources after September 30, 1981. A rescission of unneeded funds for the
countercyclical PSE program (Title VI) is being requested and excess resources in the Title II-D PSE
program are being deferred in 1982. A 1982 budget amendment is being proposed to reduce the
pending request for resources needed for the continuing CETA programs.
The approximately 307,000 individuals who currently hold CETA-funded jobs will either continue in
their jobs and be absorbed into the regular State or local government payroll, be placed in an
unsubsidized job in the private sector by the CETA sponsor, or have to seek employment elsewhere.
Those who lose their jobs will be eligible for unemployment compensation. Average employment
during 1981 is expected to be 232,000 under the phase-out plan.

Rationale
In keeping with the Administration's intention to apply rigorous standards to economic subsidy
programs, the reduction in PSE will return CETA to its original purpose of improving the long-term
employability of the low-income, structurally unemployed by providing them with skills that are
marketable in the private sector. Changes to the law to advance the "government as employer of last
resort" philosophy prevalent during the 70's among training and employment theorists have altered
CETA substantially and made PSE the dominant component. Public service employment programs
provide little skills training. The work experience that PSE participants receive in public sector jobs
has not helped most of them in seeking private sector -employment, often because the types of jobs
they get in the public sector have no counterparts in the private sector.
In addition to being unsuccessful as a counterstructural employment and training strategy, PSE has
proven to be a poor countercyclical device. High levels of PSE employment were reached only in
1977-78, after the depth of the 1974-75 recession had long passed. Considerable evidence indicates,
moreover, that the net job creation impact of PSE programs has been relatively small in the longer
term. Several studies have shown that a high proportion of CETA employment supplants, rather than
augments, hirings that would have occurred regardless of the presence of CETA, effectively diverting

235

funds that would have been used for this purpose to other endeavors. In all, the track record of PSE
programs in achieving their purported objective — to enhance the employability of participants for
the 8 out of 10 jobs created by the private sector — has been dismal indeed.
By contrast, training, especially on-the-job training, appears to lead to higher post-program increases
in earnings than public service employment. The current Federal training programs have proven to
be more effective than the PSE programs at placing participants. Moreover, the average cost of
getting an unemployed person into an unsubsidized job from the PSE programs is two to three times
more expensive than under the training programs.

Key Facts About the Program
•

Enrollment data 2/28/81: II-D-208,000; VI-99,000; total-307,000.

•

1981 Carter end-of-year enrollment goal: II-D-240,000; VI-100,000; total-340,000.

•

The National Commission on Employment Policy has recommended against using PSE as a
countercyclical tool.

•

There is no difference in the characteristics of
(counterstructual PSE) and VI (countercyclical PSE).

•

90% of PSE eligibles are estimated to be eligible under both titles.

•

Placement into unsubsidized employment from PSE was 34% in 1980; 41% from training
programs.

•

In 1980 it cost from $17,000 to $22,000 for each PSE worker placed into unsubsidized
employment, 2 to 3 times the cost of each placement in the training program ($5,000 —
$11,000).

•

Only 30% of PSE enrollees but half of CETA training enrollees have less than a high school
education.

•

Skills training like OJT shows greater post-program income gains (c. $850) than PSE
programs (c. $350-750).

236

individuals

participating

II-D

Employment Service
Agency: Department of
Labor

Functional
Code: 504

Funding
CARTER BUDGET:
Budget Authority
Outlays
REESTIMATES & ADJUSTMENTS:
Budget Authority
Outlays
PROGRAM CHANGES:
Budget Authority
Outlays
REAGAN BUDGET:
Budget Authority
Outlays

1981

1982

24
807

26
879

($ in millions)
1983
1984

1985

1986

29
955

31
1,039

34
1,128

37
1,224

-3
-76

-5
-160

-8
-249

-11
-345

-4
-150

-4
- 150

22
729

—

-4

24
803

Budget Reform
Criterion: 6

Program Description
The federally financed Employment Service (ES) provides recruitment services for employers through
more than 2,400 local offices and job-finding and placement sendees for job seekers. The ES
provides special services to employers, including screening and testing applicants to find those who
match an employer's job specifications, assisting employers to modify jobs that have been hard to fill,
and helping to alleviate in-plant employment problems such as high turnover. Job seekers may
receive counseling or testing services. The 1982 Carter Budget would have maintained 30,000 ES
State staff funded by Federal grants to States.

Proposed Change
The ES will be redirected to focus job-finding services on those with the most need for assistance and
to give others the basic tools needed to search for their own jobs. Direct services to employers,
including job listings, visits to employers, screening and testing for employers, and assistance in job
restructuring to reduce turnover or absenteeism will decline.
ES staff funded by these grants will be reduced in 1982 to about 25,000.
in reporting, overhead, program monitoring, and intermediate levels
placement activities will also be reduced as the ES redirects resources to
such as assisting job seekers in finding their own jobs through job-search
clubs.

Staff reductions will occur
of supervision.
Staff in
less labor intensive efforts,
workshops and job-finding

Rationale
The change will impose fiscal restraint on this program of national interest Reporting and overhead
burdens on staff providing direct services will be reduced, and staff will be utilized more efficiendy in
helping job seekers find their own jobs.

Key Facts About the Program
•

These State staff are financed 97% from the Federal unemployment tax on covered
employers (reflecting 97% coverage of wage and salaried employment by UI) and 3% from
the general funds of the U.S. Treasury.

•

Only about 5-8% of job holders got their job through the Employment Service (ES).

•

Over 60% of job holders got jobs by applying directly to employers or through friends or
relatives.

•

An unexplained variation among States in placements per staff year indicates substantial
inefficiencies in the Employment Sendee; the highest 10 States place 266 people in jobs per
staff year; the lowest 10 States place only 131 (1980 data).

237

Federal Employee Injury Compensation Program
Agency: Department of
Labor

Functional
Code: 602

Funding
CARTER BUDGET:
Budget Authority
Outlays
REESTIMATES & ADJUSTMENTS:
Budget Authority
Outlays
PROGRAM CHANGES:
Budget Authority
Outlays
REAGAN BUDGET:
Budget Authority
Outlays

Budget Reform
Criterion: 1
($ in millions)
1984
1983

1981

1982

311
311

353
353

349
349

5
5

-8
-8

316
316

1985

1986

415
415

490
490

568
568

40
40

16
16

-9
-9

-57
-57

-50
-50

-54
-54

-59
-59

-63
-63

-69
-69

295
295

335
335

372
372

418
418

442
442

Program Description
Federal employees injured on the job receive reimbursement for medical expenses and tax-exempt
monthly income replacement payments equal to 75% of their former gross salaries. These payments
can continue for life. An employee who files a claim that an injury prevents reporting for work can
continue to receive full pay for up to 45 days while the claim is being examined.

Proposed Change
•

Make income replacement payments subject to Federal income taxes, but increase the
replacement rate to 80% of gross pay.

•

Reinstate a 3-day waiting period before a claimant can receive compensation.

•

Reduce continuation-of-pay while a claim is being examined to 80% of gross pay.

•

Convert injury compensation recipients to civil service annuity rolls after age 65.

Rationale
As part of the general effort to improve entitlement programs, the Administration will overhaul the
Federal employee injury compensation program. These changes are geared to removing (1) incentives
to file questionable claims; (2) disincentives for injured workers to return to work when they are
medically able to do so; and (3) inequities in compensation rates, which permit higher paid workers to
receive more in compensation benefits than they received in take-home pay when working.
The changes are being proposed because the number of claims being submitted for workers'
compensation benefits under the Federal Employees' Compensation Act (FECA) has been growing at
an alarming pace, bearing no relationship to the number of Federal employees or the Government's^
safety record. The annual number of claims received by this program has grown from 18,000 in fiscal
year 1970 to over 30,000 in 1980. The increased use of the program is also reflected in the growth of
benefit payments, from $151 million in 1970 to $785 million in 1980, to over $1.0 billion in 1982.
These figures do not include the estimated $100-110 million paid out annually by agencies during the
45-day continuation-of-pay period,
In a era when all sectors of society are being called on to restrain growth of government, it is
inequitable to provide Federal employees with an injury compensation system which through poor
design overcompensates employees relative to the compensation received in the private sector for
similar injuries and creates a disincentive to return to work once on the rolls.

Key Facts About the Program
•

Each year about 220 thousand injuries- are reported, 105 thousand employees get
continuation-of-pay, and 30 thousand full claims are received.
238

•

Total benefits in 1982 are effected to be $1.1 billion; other agency payments reduce Labor
Department outlays.

•

Amendments in 1974 greatly liberalized program:
— Eliminated 3-day waiting period
— Added 45-day continuation of full pay
— Raised replacement rate for all to 75% of gross pay
— Allowed claimant to select doctor for opinion on disability

•

The number of injuries reported rose from an average of 117 thousand a year in the 6 years
before the amendments, to 217 thousand in the 6 years following the amendments. Yet
average Government employment declined, and there was no change in the average number
of job related deaths. This indicates that the Government's safety program has not
deteriorated.

239

Trade Adjustment Assistance
Agency: Department of Labor

Functional
Code: 603

Funding
1981
CARTER BUDGET:
Budget Authority
Outlays
REESTLMATES & ADJUSTMENTS:
Budget Authority
Outlays
PROGRAM CHANGES:
Budget Authority
Outlays
REAGAN BUDGET:
Budget Authority
Outlays

2,700
2,744

1982

Budget Reform
Criterion: 1
($ in millions)
1984
1983

1985

1986

1,500
1,500

1,000
1,000

500
500

500
530

-1.150
-1,150

-760
-760

-380
-380

350
350

240
240

120
120

150
150

Program Description
Trade Adjustment Assistance (TAA) benefits are paid to workers whose loss of work is attributed, at
least in part, to imports. The benefits equal 70% of the workers previous gross wages for up to 52
weeks, with a current maximum of $289 a week. These benefits can be paid at the same time as the
worker is receivng unemployment insurance benefits, although the resulting total weekly payment
does not exceed the TAA amount

Proposed Change
The changes, effective October 1981, for all claimants, would refocus TAA on its primary purpose —
adjustment to changed economic conditions. Workers would receive a weekly TAA payment only
after they used up all their weeks of unemployment insurance. The TAA weekly payment would
equal the unemployment insurance benefit. A total of 52 weeks of benefits (unemployment insurance
followed by TAA) would be available. Thus the additional weeks of TAA benefits would be available
only for workers displaced from their jobs for extended periods who need more time than provided
by unemployment insurance to get training, relocate, or find jobs.

Rationale
The changes would revise entitlement to TAA to eliminate unintended benefits. Benefits would be
provided only to those workers who truly need additional time to adjust to changed economic
conditions, rather than to all regardless of whether their layoffs last two weeks or are permanent.
The changes will virtually eliminate the large retroactive payments under the program, many of which
are made to workers who are already back on the job. They will also stop the subsidy to
supplemental unemployment benefits (SUB) funds which have been set up by various companies.
These funds now can substitute Federal TAA benefits for benefits the workers are already entitled to
under their collectively bargained contracts.

Key Facts About the Program
•

About 583 thousand people are expected to receive TAA benefits in fiscal year 1981; 234
thousand in 1982.

•

Most trade benefits are now paid in the large industrial States of the east and midwest:
Michigan, Ohio, Indiana, New York, Missouri, and Pennsylvania.

•

The Current Program pays 70% of gross wages for 52 weeks ($289.00/week maximum;
maximum adjusted annually in relation to national average wage; last adjustment effective
March 23, 1981); UI usually pays 50% of gross wages for 26 weeks (maximum weekly
benefits usually 50% of State average wage).

240

Of 754 thousand workers who got benefits from 4/75 to 6/80, only 3.3% entered training;
1.6% completed training; 0.46% took job search aid; 0.27% relocation allowances.
From 4/75 to 6/80, 54% of TAA applicants were already re-employed at the time they
applied for benefits.
In 1980, $798M in retroactive payments were made to autoworkers; such payments often
must be repaid to auto company Supplemental Unemployment Benefit (SUB) funds.
A Mathematica study of TAA recipients who got first payments in 1976 showed that:
—

Seventy-two percent went back to original employer

—

On average they were employed 75% of the next 3-1/2 years

—

When benefits are disproportionately high, length of unemployment increases; a 10%
increase in wage replacement ratio was associated with a 4-day increase in length of
unemployment.

241

Unemployment Compensation for Ex-Servicemembers
Agency: Department of
Labor

Functional
Code: 603

Funding
CARTER BUDGET:
Budget Authority
Outlays
REESTIMATES & ADJUSTMENTS:
Budget Authority
Outlays
PROGRAM CHANGES:
Budget Authority
Outlays
REAGAN BUDGET:
Budget Authority
Outlays

Budget Reform
Criterion: 1
($ in millions)
1984
1983

1981

1982

333
333

351
351

341
341

-28
-28

-101
-101

-60
-60
245
245

1985

1986

356
356

370
370

390
390

-92
-92

-98
-98

-110
-110

-129
-129

-225
-225

-237
-237

-245
-245

-247
-247

-248
-248

25
25

12
12

13
13

Program Description
Currently, most members of the armed forces who have served at least a year are eligible for 26 weeks
of unemployment compensation benefits in most States. Unlike civilian workers, ex-servicemembers
may draw benefits even if they quit their job voluntarily.

Proposed Change
The proposed amendment would make ineligible for benefits those military personnel who voluntarily
leave the service, who are released or separated for cause, or who fail to reenlist when they could have
done so. The change would be effective for all separations beginning July 1, 1981.

Rationale
This change would revise the entitlement for unemployment benefits to eliminate unintended benefits
by bringing treatment of ex-military personnel more in line with current treatment of civilians. It
would establish national rules for military separations that are voluntary or for cause. In virtually
every State, a worker who voluntarily leaves his job receives no benefits for that spell of
unemployment or for a part of it or has his weekly benefit reduced. Workers who refuse a job in their
customary line of work have their benefits stopped. Those civilians who are discharged for misconduct
also receive no benefits. The change will mean that members of the all-volunteer military will be
treated similarly to civilians, instead of continuing to receive special treatment that dates from an
earlier period when military sendee was not entirely voluntary..

Key Facts About the Program
•

About 140 thousand ex-sendcemembers are expected to receive
compensation under this program in 1982 and a similar number in 1983.

•

About 130 thousand will have left the service voluntarily or have been discharged for cause.

•

The average weekly benefit payment is expected to be $112 in 1982 and $118 in 1983.

242

unemployment

Unemployment Insurance: Extended Benefits
Agency: Department of
Labor

Functional
Code: 603

Funding
1981
CARTER BUDGET:
Budget Authority
Outlays
REESTIMATES & ADJUSTMENTS:
Budget Authority
Outlays
PROGRAM CHANGES:
Budget Authority
Outlays
REAGAN BUDGET:
Budget Authority
Outlays

1982

Budget Reform
Criterion: 1
($ in millions)
1984
1983

1985

1986

19913
4315

23072
1480

23722
946

23314
510

23400
476

21888
460

-615
-221

-1452
-215

-1243
-489

-95
-87

-1176
-63

+ 538
-122

-400
-523

-13

-200
-108

-86

-100
-278

-200
-289

18898
3571

21620
1252

22279
349

23219
337

22124
135

22226
49

NOTE: Total budget authority for unemployment insurance is shown because budget authority for extended benefits is not separately
identifiable.

Program Description
Federal law provides that the length of time a person can receive unemployment benefits in a State is
made half again as long when the insured unemployment rate reaches specified levels in either the
State ("State trigger") or the nation as a whole ("National trigger"). The length of time is usually
extended from 26 weeks to 39 weeks. These extended benefits must be paid when a State's insured
unemployment rate has averaged at least 4% for 13 weeks and is at least 20% higher than in the
corresponding period of the prior two years. States can, and many do, pay these extended benefits
when their insured unemployment rate averages at last 5% for 13 weeks regardless of the rate in the
prior two years. These benefits are paid in all States when the national insured unemployment rate
averages 4.5% for 13 weeks. The insured unemployment rate is calculated by dividing the number of
people receiving unemployment insurance, including those receiving extended benefits, by the number
of people in the labor force covered by unemployment insurance.

Proposed Change
•

Eliminate the national trigger, which requires payment of extended benefits even in States
with low unemployment rates.

•

Increase the insured unemployment rate needed to trigger extended benefits on in a State
from 4% to 5% if it is 20% above the rate of the prior 2 years; to 6% for those States that
wish to pay the benefits regardless of the rate in prior years.

•

Strictly enforce the work test enacted last year that requires recipients to accept jobs that pay
at least as much as their weekly benefit or the minimum wage, whichever is higher, or lose
their extended benefits..

•

Prohibit the payment of extended benefits to those who did not work at least 20 weeks in
the year which made them eligible for unemployment insurance.

•

Remove recipients of extended benefits from the calculation of the insured unemployment
rate.

Rationale
These changes are part of the program to* revise entitlements to eliminate excess and unintended
benefits. Studies show that extending the length of time people can receive unemployment benefits
provides a disincentive to work that increases the average length of a spell of unemployment, thus
decreasing productive work and unnecessarily increasing benefit outlays.

243

Eliminating the national extended benefits program will prevent paying benefits in States with low
unemployment where it is not needed. As a result of structural shifts in the U.S. economy, while
insured unemployment is intolerably high in the industrial Northeast and Midwest, it remains below
2% in a number of sun belt States.
The proposed shift to State triggers at modestly higher threshold levels will redirect benefits to areas
where they are needed while removing incentives for prolonging unemployment in growth areas of
the nation where job opportunities are available.
Strict enforcement of the new work test will help workers who have little chance to return to their old
occupation face the reality of the changing economy and begin new careers. Prohibiting the payment
of extended benefits to those with less than 20 weeks of work in the year in which their eligibility for
benefits is based will minimize the occasions when workers receive benefits for longer periods of time
than they were employed."
Changing the method of calculating the insured unemployment rate will remove several anomalies in
the current program. The payment of extended benefits will not be delayed when unemployment
rises. This can happen now if people were receiving extended benefits in the prior years' comparison
periods; those similar unemployment experiences cannot be counted currently when extended benefits
have not started. Payment of extended benefits will not continue when unemployent falls below the
level needed to start payment. Extended benefits will no longer be paid in one State for several
months while they are not paid in a second State with an identical overall unemployment rate.

Key Facts About the Program
•

About 2.2 million people are expected to receive extended benefits in 1982 under current
law; the proposals will reduce the number to 1.1 million.

•

Studies indicate that on average the availability of 13 additional weeks of UI adds 1 to 5
weeks to the length of unemployment.

•

When national trigger went on July 5, 1980:
only 19 States had rates high enough to trigger it on.
Eight States were below a 2% insured unemployment rate.

•

When national trigger went off on January 3,1981:
only 25 States had rates high enough to continue EB..

Effective Dates:
•

Work test strict enforcement effective April 1, 1981.

•

Eliminate national trigger effective July 1, 1981.

•

Trigger rate calculation change effective the week after enactment (estimates assume by July
1, 1981).

•

Increased State trigger rates and 20 weeks work in qualifying year require State legislative
change; therefore effective October 1, 1982.

244

Unemployment Insurance: Regular Benefits Work Test
Agency: Department of
Labor

Functional
Code: 603

Funding
1981
CARTER BUDGET:
Budget Authority
Outlays
REESTIMATES & ADJUSTMENTS:
Budget Authority
Outlays
PROGRAM CHANGES:
Budget Authority
Outlays
REAGAN BUDGET:
Budget Authority
Outlays

1982

Budget Reform
Criterion: 1
($ in millions)
1984
1983

1985

1986

16,477

16,717

16,782

16,754

16,687

16,661

-435

-1,136

-1,997

-1,862

-2,069

-2,357

-285

-272

-264

14,500

14,607

14,346

14,040

16,042

15,581

NOTE: Budget authority is determined by unemployment trust fund receipts, which would not be changed by this proposal.

Program Description
Those who have lost jobs through no fault of their own are entitled to weekly unemployment benefits.
The amount of the benefit (usually 50% of wages up to a maximum set in State law) and the number
of weeks it is paid (usually a 26-week maximum) is determined by State law. Under current laws
workers who refuse to accept suitable work are denied unemployment insurance (UI) benefits.
However, suitable work is usually defined as a job similar to the claimant's previous employment.

Proposed Change
The proposal would require workers who have received 13 weeks of UI benefits and whose prospects
for returning to their previous line of work are not good to seek employment that provides wages at
least equal to their UI benefit amount, or the minimum wage, whichever is higher.

Rationale
This change would revise the unemployment insurance system to eliminate unintended benefits. By
allowing workers in most States to draw up to 6 months of benefits unless jobs, in their former
occupations are available, the unemployment insurance system actually discourages workers from
seeking employment in new industries which, while they pay lower wages initially, hold the prospect
of growing employment and new careers. The change will speed the transition of workers from jobs
which are not opening up again to jobs in sectors where workers are in demand.

Key Facts About the Program
•

About 9.2 million people are expected to receive UI payments in 1983.

•

The proposed change would affect 280 thousand of them.

•

The average weekly UI payment in 1983 is expected to be $112.

•

Federal law now has no suitability of work requirement for regular benefits.

•

The change would apply the new Federal work test enacted last year for extended benefit
claimants (generally those after 26 weeks) to regular claimants after they had collected 13
weeks of UI.

•

The change would be effective October 1, 1982, to permit necessary State law changes.

245

Young Adult Conservation Corps (YACC)
Agency: Department of
Labor

Functional
Code: 504

Funding
CARTER BUDGET:
Budget Authority
Outlays
REESTIMATES & ADJUSTMENTS:
Budget Authority
Outlays
PROGRAM CHANGES: 27
Budget Authority
Outlays
REAGAN BUDGET:
Budget Authority
Outlays

1981

1982

20017
185

Budget Reform
Criterion: 6
($ in millions)
1983
1984

1985

1986

1985
-250
-250

1986
-250
-250

- "7

- 70

Includes a deferral of S58.1M to finance the completion of the phase-out in 1982.

The Carter Budget already included savings for this proposal. Total savings
1981
1982
Budget Authority
- -250
Outlays
~ ~
-179

expected are as follows:
1983
1984
-250
-250
-243
-250

Program Description
The YACC program (CETA Title VIII), authorized in 1977, funds conservation work on public lands
by unemployed youth ages 16 to 23 of all income levels. Seventy percent of the funds go to the
Departments of Agriculture and the Interior (35% to each); 30% are grants to States distributed by
share of youth population. In 1980, about 22,700 years of service were provided with an end-of-year
participant level of 19,600. The current services program level is about 20,000 participants.
The Carter Budget proposed to phase the program out by the end of FY 1982 through attrition.
Funds which have been deferred in 1981 would finance phase-out activities in 1982, so no 1982
appropriation was requested.

Proposed Change
Do not amend Carter request - continue policy to terminate program. Enrollments would drop to
about 11,200 by the end of this fiscal year and to zero by the end of 1982. Some State and Federal
conservation work would go undone, but the projects have such little value that few would be
undertaken in the absence of the free labor provided by the YACC program. The phase-out will have
little impact on current YACC program participants because layoffs will not in general be required.
The impact on those who might have enrolled if the program were continued is also expected to be
minimal because the program is so small - about 450 youth per State - and draws few participants
from any particular group of youth.

Rationale
This is a low priority program which cannot be justified in a time of general fiscal restraint. Of all
Federal employment and training programs, it is the least targeted on the economically disadvantaged
and minorities who are most in need. At the same time, with the exception of the highly targeted and
entirely residential Job Corps training program, it costs the most to provide a year of service to a
participant. Furthermore, with the exception of the PSE and Youth Community Conservation and
Improvement Projects (YCCIP) programs, YACC has the worst record of placing participants in jobs,
school, the military, or other training programs. The PSE program is also being phased out. YCCIP is
being consolidated into the general employment and training grant under Title II of CETA. States and
localities can therefore decide whether it is appropriate to continue YCCIP projects in their
communities.

246

Key Facts About the Program
•

70% of funds are spent on Federal lands.

•

Therefore, 50% of the 1,700 project camps are located in 10 States west of the Mississippi
with 19% of the U.S. population and an average overall unemployment rate slightly below
the U.S. 1980 average:

•

Only 33% of YACC participants are economically disadvantaged, compared to 100% in the
Job Corps; only 12% are black, compared to 53% in the Job Corps.

•

On the other hand 59% are high school completers, compared to only 15% in the Job Corps.

•

It costs $12,100 to serve an enrollee for one year in YACC.

•

Because of low targeting and high cost, YACC must spend $305,000 to provide one year of
service to low-income black youth, those most at risk in the labor market.

•

When the Job Corps spends this much, it provides 12 years of service to low income Black
youth.

247

Youth Initiative
Agency: Department of Education
Department of Labor

Functional
Budget Reform
Code: 501 (Education)
Criterion: 6
504 (Labor)
924 (contingency allowance)

Funding
1981
CARTER BUDGET 17 :
Budget A uthority—Education
Budget Authority—Labor
Contingency
Total
Outlays— Education
Outlays—Labor
Contingency
Total
REESTIMATES AND ADJUSTMENTS:
Budget Authority
Outlays
PROGRAM CHANGES:
Budget Authority
Outlays
REAGAN BUDGET:
Budget Authority
Outlays

1982
900
250

($ in millions)
1984
1983

—

1,150
50
80

—

130

900
250
800
1,950
900
232
260
1,392

-1.150
-130

-1,950
-1,392

—

—
—

—
- -

—
—

-—

1985

1986

900
250
800
1,950
900
250
760
1,910

900
250
800
1,950
900
250
800
1,950

-1,950
-1,910

-1,950
-1,950

—
—

Includes only the increase above the current services levels of the programs which were proposed to be included in the initiative.

Program Description
The Carter Budget included a youth initiative originally proposed in the' 1981 budget which would
have established a basic skills improvement program involving new grant programs in the
Departments of Education and Labor.
The Education grant would have aimed at improving the basic literacy and employability skills of
disadvantaged youth in one-fourth of the nation's school districts. It would have attempted to carry
out the objectives of Title I of the Elementary and Secondary Education Act and the Vocational
Education Act in secondary schools, which have not received much funding from local school
authorities from these sources for development of basic and employability skills. The program would
also have emphasized the integration of basic skills training into all aspects of the regular secondary
school curriculum.
The Labor grant,, which would have consolidated three existing youth programs, would have aimed
primarily at improving the basic skills of older, mostly drop-out, disadvantaged youth, although
carefully structured work experience would also have been provided.
The outyear contingency amount was to be allocated between the departments in 1983 as final
legislation evolved and implementation planning moved further along.
Emphasis was to be placed on substantially increased coordination between education and training,
and employment agencies and among these agencies and the business community.

Proposed Changes
Do not request the new legislation. Experience with the programs on which the initiative was based
does not permit an estimate of the impact of not implementing such a program in terms of
improvements in basic skills, unemployment rates, or future earnings of youth.

Rationale
Funding of this magnitude above funding for current programs cannot be justified at a time when
current programs are being sharply reduced as pan of the President's economic recovery program.
This lack of justification is particularly acute for a program involving significant changes in
institutional relationships, at all levels of government, when these new and complex relationships have
not yet been tested for feasibility and productivity.- Rather than attempting to implement a new
program, this Administration will devote its efforts to assuring a more effective and efficient use of
resources that can be made available to ongoing programs.

248

Department of State

249

Department of State
Conduct of Foreign Affairs
Agency: Department of
State

Functional
Code: 151,153

Funding
1981
CARTER BUDGET:
Budget Authority
Outlays
REESTIMATES & ADJUSTMENTS:
Budget Authority
Outlays
PROGRAM CHANGES:
Budget Authority
Outlays
REAGAN BUDGET:
Budget Authority
Outlays

1982

Budget Reform
Criterion: 6
(S in millions)
1984
1983

1985

1986

1,916
1,657

2.369
1.997

2,317
2,110

2,456
2,226

2,524
2,315

2,575
2,419

-16

-126
-126

-307
-242

-405
-352

-476
-475

-28
-23

-77
-64

-56
-63

-39
-46

-40
-40

-43
-43

1,888
1,668

2.292
1,917

2,135
1,921

2.110
1,928

2,077
1,923

2,056
1,901

Above table excludes assessed contributions to international organizations which are shown in the section on foreign
development assistance.

Program Description
The central efforts of the State Department are directed toward political and economic reporting and
analysis; representation and negotiation; visa and passport issuance and tl;e protection and welfare of
Americans living and travelling abroad; and the administrative support for those activities and for
employees of 22 other U.S. agencies working abroad. In addition, the Department provides assistance
to refugees; and manages grants to a limited number of private entities engaged in international
activities; such as, the Asia Foundation and the American Institute in Taiwan.

Proposed Change
Major changes to the Carter Budget include the following:
•

Reductions in refugee assistance due to reduced needs (-$22 million in 1981 and -$42
million in 1982).

•

Administrative reductions, including an employment cut of 550 full-time permanent
employees in 1982 and cuts for travel and equipment (-$3 million in 1981 and -$14 million
in 1982).

•

Elimination of all new overseas building construction starts except for the diplomatic
complex in Riyadh, Saudia Arabia (-$15 million in 1982).

•

Reductions in grant assistance for international narcotics control (-$3 million in both 1981
and 1982) and elimination of funding for the Asia Foundation ( -$4 million in 1982).

Rationale
These changes are a part of the Administration's effort to impose fiscal restraint on programs of
relatively low priority. The reductions in refugee programs will not diminish the strong U.S. support
for these humanitarian efforts. Cuts are being taken only where there is clear evidence that previous
estimates of need were overstated. Funding for the Asia Foundation is eliminated, because that
institution is no longer a significant factor supporting U.S. foreign policy objectives abroad. The
cutback in funding for narcotics control also merely reflects diminished need.
The reductions in staff levels are based on the premise that operating efficiences can be achieved and
reflect the lower level of administrative support needed for the Agency for International Development
and the International Communication Agency programs, which have been cut from Carter budget
levels.

251

Key Facts About the Program
•

Refugee Assistance, Abroad — Reductions eliminate unneeded funds for various refugee aid
programs abroad while maintaining basic levels of services. The Kampuchean relief program
is reduced by $10 million in 1981 and $20 million in 1982 due to much improved conditions
in Kampuchea. Reduced Indochinese refugee camp populations in Southeast Asia and other
lower needs save an additional $12.5' million in 1982.
Sharply lower numbers of Soviet refugees emigrating to Israel reduce resettlement needs in
1981 by $12.5 million. For 1982, however, support for Soviet refugees to Israel will be $12.5
million, 25 percent above the Carter budget request. The 1982 request for the Reftigee
Emergency Fund is reduced by $10 million because of large uncommitted balances
anticipated to be carried forward for use in 1982.

•

The Asia Foundation — The Asia Foundation is a private, non-profit organization which
attempts to encourage pro-western legal and social reform and to improve the understanding
of democratic ideals. It employs approximately 140 individuals in its San Francisco
headquarters and eleven Asian countries. In view of current budget stringency, no U.S.
agency believes activities of the Foundation are important enough to its objectives to warrant
offsetting reductions in other activities.

252

Department of Transportation

253

Airport Grant Program Reductions
Agency: Department of
Transportation

Functional
Code: 402

Funding
CARTER BUDGET:
Budget Authority
Outlays
REESTIMATES & ADJUSTMENTS:
Budget Authority
Outlays
PROGRAM CHANGES:
Budget Authority
Outlays
REAGAN BUDGET:
Budget Authority
Outlays

Budget Reform
Criterion: 5
($ in millions)
1984
1983

1981

1982

722
524

750
535

800
725

•272
-49

-300
- 50

450
475

450
485

1985

1986

850
901

900
908

975
878

-350
-215

-400
-381

-450
-458

-525
-363

450
510

450
520

450
450

450
515

Program Description
The airport grant program, which expired at the end of 1980, provided funds to air carrier and general
aviation airports. Funds were distributed on both an apportionment and a discretionary basis. In
1980, $569 million was authorized for air carrier airports, with a minimum of $15 million earmarked
for commuter airports. General aviation airports were authorized to receive $98 million, with a
minimum of $20 million for reliever airports, which were defined as general aviation airports that
attract general aviation flights from large airports.
Grant funds could be used for:
•
Construction and reconstruction of items such as runways, taxiways, aircraft aprons, and
public-use portions of terminals;
•
Land acquisition for airport development and noise abatement;
Acquisition or installation of navigation aids used in landings and take-offs.
•
The Carter 1982 budget assumed enactment of reauthorizing legislation by July 1,1981. Recommended
funding levels increased from $722 to $975 million during 1981-1986.

Proposed Change
The Administration has proposed legislation to restructure the airport grant program and hold the
annual funding level to $450 million during 1981-1986. Included in the legislation are proposals to:
•
Defederalize the 41 largest primary airports (primary airports are commercial service airports
that enplane at least .01% of total annual enplanements at all commercial service airports);
•
Remove restrictions on imposition of a "head tax" at those 41 airports and others opting not
to receive further Federal assistance;
•
Use number of enplanements as the basis for apportioning entitlement funds to the
remaining primary airports (approximately 255 airports which would be eligible after
defederalization);
•
Introduce the airport "block grant" to permit State involvement in allocating funds to
general aviation and smaller commercial service airports;
•
Increase funding significantly for reliever airports; and
•
Continue the discretionary grant program.

Rationale
Reductions in the airport grant program are thoroughly consistent with the Administration's broad
effort to retarget public sector capital improvement programs so that Federal assistance is not
provided unless there is a clear need. In addition, the proposed framework for the grant program is
consistent with a number of the Administration's goals for restructuring Federal programs, such as
allowing .more decisions to be made at the local level and reducing the number of strings attached to
Federal grants.
Defederalization of the largest primary airports would enable the Federal Government to target funds
to those airports with the clearest need for assistance. These large airports usually have a strong

255

financial base from landing fees and space rental charges. Many large airports earn a profit.
Furthermore, Federal airport grants traditionally have provided only a small portion (approximately
10-15%) of the total revenues of these airports. Removing the statutory bar on "head taxes" would
increase the possibility of local funding being available, if needed, in lieu of Federal financial aid.
Some airports may opt to renegotiate landing fees instead of instituting head taxes.
The State block grant approach for grants to smaller eligible airports reflects the Administration's
commitment to reduce Federal involvement in local decisions and the "red tape" burden placed on
States and localities. The increased emphasis on funding for reliever airports reflects the important
role of these airports in enhancing safety by ameliorating the often congested air traffic conditions at
the nation's largest airports.

Key Facts About the Program
Defederalization of the 41 largest primary airports would be phased-in — 21 beginning in 1981 and an
additional 20 beginning in 1983. A cap of 45% in 1981 and 1982 and 40% in 1983 and beyond would be
placed on the amount of available grant funds allocated to primary airports through the entitlement
program. This translates into a maximum of $202.5 million in 1981 and 1982 an4 $180 million in 1983
and beyond.
Grant funds for smaller eligible airports would be apportioned by States using a two-part formula
taking into account population, land area and the number of non-primary commercial service airports
in a State. State apportionments would be reduced proportionately to the reduction required to bring
primary airports within the cap. States meeting certain criteria would be authorized to receive
apportionments for smaller eligible airports on a block grant basis. Approximately $100 million
annually would be apportioned among the States.
The FAA would continue to allocate discretionary funds according to priority needs. States
participating in the block grant program for apportioned funds would be able to receive discretionary
funds on a project-by-project basis in the form of a "block grant supplement."
A minimum of $45 million would be earmarked for reliever airports in 1981 and 1982 increasing up to
$54 million in 1985.

256

Airport and Airway Trust Fund
Agency: Department of
Transportation

Governmental Receipts into the
Airport and Airway Trust Fund
Current receipts
Policy increase
Proposed receipts

Functional
Code: 402

Budget Reform
Criterion:
5
(S in billions)

1981

1982

1983

1984

1985

- 1/
.2 If
.2

1.4
0.6
2.0

1.5
0.8
2.3

1.7
1.1
2.8

1.9
1.3
3.2

1986
2.1
1.6
3.7

1/ Statutory authority permitting deposit of receipts into the Airport and Airway Trust Fund expired on September 30,1980.
Current user tax revenues are being deposited into the general fund and highway trust fund.
2/ Legislation authorizing the Administration's tax proposal and use of the Trust Fund is assumed to go into effect on July 1,1981.

Program Description
Prior to the expiration of statutory authority at the end of 1980, revenues from the following aviation
user taxes were being deposited into the Airport and Airway Trust Fund: 8% passenger ticket tax, 7
cents/gallon general aviation fuel tax, 5% freight waybill tax, $3.00 International departure tax and
other miscellaneous taxes. The only aviation user taxes currently being levied — a 5% passenger
ticket tax, 4 cents/gallon tax on general aviation gasoline and a tire and tube tax — are being
deposited into the general fund (ticket tax) and highway trust fund, respectively. The Carter 1982
budget assumed passage of legislation authorizing continued use of the Airport and Airway Trust
Fund and increased aviation user taxes starting July 1,1981.
The Congress traditionally has restricted use of aviation tax revenue. In the past few years, the result
has been that expenditures from aviation tax revenue covered only slightly over 40% of the total
system costs. The general taxpayer has carried the rest of the burden.

Proposed Change
The Administration has proposed legislation that would eliminate general fund subsidy of the costs
put on the system by the air carriers and general aviation. Air carrier and general aviation would be
required to pay approximately 85% of system costs — i.e., all Federal Aviation Administration costs
except those associated with military and government use of the system and Metropolitan Washington
Airports.
The February 18th and March 10th budget proposals assumed a 9% passenger ticket tax, 20% general
aviation fuel tax, 5% freight waybill tax, $3.00 International departure tax and other miscellaneous
taxes. Tax revenues would be deposited into the Airport and Airway Trust Fund.
The tax levels included in the legislative proposal sent to Congress on March 19th — which were
based on fuller consideration of allocable costs, program levels to be covered by the fund, and the
allocation of costs between general and commercial aviation — were as follows:
Passenger Ticket Tax
General Aviation Gasoline
Tax (cents/gallon)
General Aviation Jet
Fuel Tax (cents/gallon)

1981
6.5%

1982
6.5%

1983
6.5%

1984
6.5%

1985
6.5%

1986
6.5%

The revised tax proposal, coupled with the 85% cost recovery requirement, is predicted to result in a
decrease of the Trust Fund balance from approximately $3.8 billion at the end of 1980 to about $2.7
billion at the end of 1984. (A trust fund balance of at least $1.0 billion is usually considered as
prudent to cover unforeseen contingencies). Beyond 1984, the uncommitted balance will gradually
begin to increase.

257
344-211 0 - 8 1 - 9

Rationale
This proposal will assist the President in achieving his goal of providing relief for the general taxpayer
by recovering more equitably the full costs attributable to the air carrier and general aviation users of
the system. In 1978, general aviation users were paying a small percentage of the system costs
attributable to them. Under the tax proposal sent to the Congress on March 19th, the portion of
allocable costs paid by general aviation will increase gradually, but significantly, through 1986. Air
carriers have been and will continue to pay at least their full share of costs attributable to them.
Subsidizing users leads to economic inefficiencies, encourages higher use of the aviation system, and
thus results in continual pressure to expand the system's capacity. To help break this cycle, air carrier
and general aviation should be held responsible for their fair share of the cost of operating as well as
maintaining and improving the airways system. In the past, only small amounts of user tax revenues
have been applied toward operating costs.
The higher tax levels on general aviation jet fuel reflect the fact that these aircraft, generally speaking,
place greater demands on the national airspace system than do less sophisticated planes utilizing
aviation gasoline.

Key Facts About the Program
Assumptions about cost allocation are a major determinant in establishing fair and equitable user
taxes. Generally speaking, two differing approaches to cost allocation have emerged. One would hold
users responsible for the costs that FAA actually incurs in providing service. The other would hold
users responsible only for the cost of the minimum service they require. In a joint use system, this
means that users operating less sophisticated aircraft (i.e., primarily general aviation) would not be
required to pay the cost FAA actually incurs in providing service to them. The unallocated costs
would be attributed to public policy regarding aviation safety, reliability and joint use. The general
taxpayer would be responsible for these costs.
The cost allocation underlying the Administration's proposal is consistent with the first approach
requiring users to pay for costs actually incurred on their behalf. In 1982, FAA's total costs can be
allocated approximately 58% to air carrier, 27% to general aviation, 14% to military and government
and 1% to Metropolitan Washington Airports.
The general aviation community has continually supported the minimum service required approach to
allocate system costs. This approach, however, is inconsistent with cost allocation assumptions used by
this Administration for other modes of transportation. For example, under an Administration
proposal, inland waterway users would be responsible for the costs associated with their use of the
system. The general taxpayer would not be paying for the "public benefit" associated with a joint use
system. Similarly, in the highway program, the general taxpayer traditionally has not. been required to
pay for the "public benefit" associated with having a highway system that accommodates various
categories of highway users. The cost allocation assumptions underlying the Administration's tax
proposal are generally accepted.
The Congressional Budget Office, for example, attributes
approximately 25% of FAA costs to general aviation, which is very close to the Administration's
proposal.

258

Amtrak Fare Subsidy Reduction
Agency: Department of
Transportation

Functional
Code: 401

Budget Reform
Criterion: 5
(S in millions)
1984
1983

1981

1982

906
769

993
943

1,082
1,112

1,171
1,201

1,257
1,284

1,337
1,387

-25
-25

-380
-304

-550
-497

-700
-689

-900
-858

-987
1,037

881
744

613
639

532
615

471
512

357
426

350
350

-964
-874

-1,056
-1,050

proposal.
-25
-25

Total savings expected are as follows:
-431
-606
-760
-355
-688
-485

1985

1986

Program Description
Amtrak is a private corporation, subsidized by the Federal Government, which has operated virtually
all intercity passenger trains since 1971. About 22 million riders are expected in 1981, over half on
routes in the northeast. Over two dozen trains operate daily along the Northeast Corridor (NEC),
round-trip trains are operated up to seven times daily on 21 other corridors, and other trains operate
approximately daily on 16 long haul routes. Amtrak does not operate freight trains.

Proposed Change
•

Amtrak will price its services, beginning in 1982, so that revenues, including contributions
from State and local governments, cover at least 50 percent of the Corporation's total costs,
excluding capital costs.

•

To comply with the above requirement, Amtrak will have to raise fares, cut expenses, and
eliminate its least patronized and most unprofitable routes. Trains will be eliminated in
order, by ratio of revenues to fully allocated cost, from poorest to best. The Secretary of
Transportation shall develop cost allocation principles to be used consistently in order to
rank trains from poorest to best.

•

Amtrak will maintain a specific fare policy for each route, with the goal of minimizing the
Federal grants necessary to support the operation of its routes.

•

The share of State funding will increase for those trains jointly funded by States arid
Amtrak. Currently the States provide 20% of related operating costs in the first year of
service, 35% in the second year, and 50% in the third year. The States' share will be 50% of
fully allocated operating costs and 100% of associated capital costs.

•

Amtrak will operate commuter rail service only if a State, local, or regional transportation
agency reimburses the corporation for the fully allocated cost of the service.

Rationale
•

Passengers pay only 40% of Amtrak operating costs. On many routes the average ticket
subsidy is $60-70 per person. Subsidy reaches as much as $192 per ticket on the Sunset
Limited (New Orleans to Los Angeles) in 1980. It would be cheaper for the government to
give someone a round trip airline ticket from Washington, D.C. to Cincinnati than to
subsidize a one-way ticket on the Shenandoah.

•

Train travel represents less than nine-tenths of one percent of intercity travel. In areas other
than the NEC and possibly a few other short' distance routes, Amtrak service is not essential
to the nation's passenger travel market.- Even if every Amtrak train were full all the time
(and Amtrak's trains normally average about half-full) the corporation would still be able to

259

handle less than 2 percent of all passenger travel in the U.S, even though it provides almost
100 percent of non-commuter passenger train travel. Yet government subsidy exceeded
S800M last year. The administration's proposal shifts the financial burden for Amtrak from
taxpayers to passengers.
•

Improvements in intercity highways and widespread availability of air travel since 1960 have
diminished the need for and utility of passenger trains. A reduction in Amtrak will result in
virtually no negative effect on personal travel in the U.S. because Amtrak trains provide such
a small percentage of U.S. intercity transportation.

•

We estimate that a limited national rail system can be funded with a $613 million budget.

•

To the extent Americans demand long distance trains, not maintained in the Amtrak system,
a private sector excursion or vacation market for such travel could emerge in the same way
that entrepreneurs now operate ships such as the Delta Queen.

Key Facts About the Program
•

Federal subsidy in 1978 was about 11 cents per bus passenger, 75 cents per commercial
aviation passenger, and 37 dollars per Amtrak passenger.

•

Between 1972 and 1980 Amtrak's annual operating deficit increased from $153 million to $657
million. Costs rose by 357 percent, 25 percent faster than revenues.

•

Between 1972 and 1974 Amtrak's fares covered over 50% of its costs. Since then costs have
increased faster than revenues.

•

Amtrak provides 48 passenger-miles per gallon of fuel across the nation. Intercity buses
provide 135 passenger-miles per gallon. An automobile carrying over two people can be
more fuel efficient than the average Amtrak train.

•

If Amtrak were able to achieve 100 percent load factors and in doing so take all its additional
passengers from automobiles, the gasoline savings would be only two tenths of one percent
of the current consumption of gasoline by automobiles.

•

Amtrak revenues cover 33 percent of its total costs including capital costs. The passenger
rail system in the United Kingdom covers approximately 70 percent, Denmark 50 percent,
and the Netherlands 50 percent.

These are various areas where Amtrak can reduce its deficit:
Fares
In the past, Amtrak has had what is called a uniform fare policy. It has generally raised fares by the
same percentage across the entire Amtrak system. There are likely to be inefficiencies in this method.
Demand and demand elasticities vary across the country. Some routes can bear no fare increase
because of competition from other transportation modes. Those routes which cannot' support a fare
increase and have low revenue/cost ratios will have to be eliminated. As certain fares are increased,
and some lines eliminated, revenues will rise as costs fall.
The Administration proposal requires system-wide coverage of 50 percent of costs in 1982. Thus,
cross subsidization is possible. This allows more routes to continue that cannot meet a 50 percent test,
but maintains the pressure to eliminate poor routes.
Labor Costs
Amtrak is currently involved in labor negotiations with its 21,000 direct employees.
opportunity now to reduce labor costs related to these employees.

It has the

The operating crews on Amtrak trains are not, however, Amtrak employees.„ Amtrak is not a party to
the national negotiations between railroad labor and management, and Amtrak must accept the labor
conditions agreed to by the railroads which directly employ the train crews, e.g., Conrail, Burlington
Northern. For this reason upcoming Conrail negotiations are also important to Amtrak.
Some Amtrak employees are eligible for severance pay at 100 percent of current pay until they are 65
and others are eligible for six years.
Operating crews earn a day's pay for 8 hours worked or 150 miles travelled. This rule dates from the
days of steam engines when a train stopped every 100 miles to refuel. As train speeds have increased,
the rule has not changed. As a result, on the NEC, which carries half of Amtrak's passengers,

260

engineers need only work for eight round trips between New York and Washington to earn a full
month's pay. This is only about 80 hours.
Eliminate Routes and Reduce Train Frequencies
As routes causing the biggest drain on the system are eliminated, Amtrak costs will fall, but revenues
will be affected to a lesser degree.
By eliminating the eight routes with the lowest revenue cost ratio, Amtrak can save $53M (i.e., forego
$90M in avoidable costs and $37M in revenue). Further savings will result as fixed facilities are
reduced to match the smaller, more efficient system.
In addition, Amtrak can reduce costs by dropping frequencies on routes with the least demand.
Operating Inefficiencies
Amtrak's on-board food service is an example of possible operating inefficiencies. Amtrak's Feburary
1981 budget estimates $122M in costs for this service in 1982, their third largest cost category for 1982.
Yet their revenues cover less than 60% of this cost. Amtrak loses over $50M annually on food service
alone.

261

Boat and Yacht User Fees (Coast Guard)
Agency: Department of
Transportation

Functional
Code: 403

Funding
1981
CARTER BUDGET:
Budget Authority
Outlays
PROGRAM CHANGES:
Budget Authority
Outlays
REAGAN BUDGET:
Budget Authority
Outlays

Budget Reform
Criterion: 3

1982

(S in millions)
1983
1984

-100
-100

-200
-200

-300
-300

-400
-400

-500
-500

-100
-100

-200
-200

-300
-300

-400
-400

-500
-500

1985

1986

Program Description
Coast Guard operating expenses will be about $1.4 billion in 1982. Virtually all the Coast Guard's
services are provided without charge: issuance of licenses; inspection of facilities; certification of
vessel construction; maintaining aids to navigation; providing rescue and assistance service, and other
services.

Proposed Change
Legislation has been proposed that would authorize the Secretary of Transportation to phase in fees
for Coast Guard services. Fees for direct services involving a transaction (e.g., licenses and
inspections) would be set according to the cost of providing the service. Other services (e.g.,
maintaining navigation aids and providing search and rescue services) would be financed by an annual
fee or tonnage duty, depending upon the type of vessel involved.
Fees will initially cover less than 10% of Coast Guard operating costs, and will rise to cover about 33%
of such costs by 1986.
As now envisioned, some fees will be collected directly by the Coast Guard. Annual fees may be
payable by purchasing a decal at a Post Office in the same way that migratory bird stamps are now
sold.

Rationale
Boat owners and the maritime community are well defined groups benefitting directly from the
services offered by the Coast Guard. They rather than the general taxpayer ought.to pay for the
services they receive.
There are about 8.5 million recreational boats in the U.S. These boats account for about 80% of all
Coast Guard rescue and assistance calls. Coast Guard's total search and rescue capability will cost
almost $370 million in 1982. Relatively modest Federal boat fees - lower in most cases than the
annual fees paid by automobile owners - would begin to cover a share of these costs and the costs of
navigation aids in our rivers, bays and harbors.
Recreational boaters and the maritime industry should easily be able to afford to pay for the costs of
the services of the Coast Guard.

Key Facts About the Program
•

The Administration's bill would not set specific fees. The Coast Guard would issue fee
schedules for public comment in accordance with normal rulemaking practice.

•

To avoid "double taxation" of boat owners on inland waterways, Coast Guard costs will not
be included in the base of costs used to calculate inland waterway user fees proposed to be
collected by the Corps of Engineers.

•

The annual fees will apply only to boats operated on navigable waters of the U.S.

262

•

Most recreational and fishing boat fees will start in the S10 range for the first year and will
be graduated upward by vessel size and other factors.

•

Large commercial vessels—foreign and domestic—would be charged a small fee based on
tonnage every time they enter a port.

•

About 36,000 merchant marine officers' licenses and 30,000 seamen's documents were
processed in 1980. Lengthy oral and written exams were involved. These exams have been
free, but a reasonable fee will be charged for them under the proposal.

263

Conrail
Agency: United States
Railway Administration

Functional
Code: 401

Funding
CARTER BUDGET:
Budget Authority
Outlays
REESTIMATES & ADJUSTMENTS:
Budget Authority
Outlays
PROGRAM CHANGES: 27
Budget Authority
Outlays
REAGAN BUDGET:
Budget Authority
Outlays
17

1981

1982

535 17
535

50
50

- -

—

-25
-125

—
100

510 17
410

Budget Reform
Criterion: 4
(S in millions)
1983
1984

—

1985

1986

—

150

Does not include $129 million of Conrail employee protection costs.
The Carter budget already included savings for this proposal. Total savings expected are as follows (savings shown as minuses):
1981
1982
1983
1984
1985
1986
Budget Authority
350
-400
-550
-300
-150
-100
Outlays
250
-300
-550
-300
-150
-100

Program Description
Conrail provides freight and commuter rail service over 17,000 route miles in the Northeastern
quadrant of the U.S. Since 1976, the Government has spent over $5.7 billion on Conrail as follows:
•

United States Railway Association (USRA) has received $3.3 billion in appropriations for
investment in Conrail to offset operating losses and undertake capital improvements. The
final increment of these appropriations is being exhausted now.

•

DOT and the Railroad Retirement Board have received $0.3 billion in appropriations to
make labor protection payments to downgraded or furloughed Conrail employees who were
employed by Conrail's bankrupt predecessor railroads (pre-1976 employees).

•

DOT has paid $2.1 billion to the Penn Central to compensate it for the properties transferred
to Conrail in 1976.

With 1981 supplemental funding requested in the Reagan Budget ($325 million), total Federal
investment in Conrail will exceed $6 billion, compared with an estimated total cost of $2.3 billion in
1976 when Conrail was formed. Despite this huge over-run in projected costs, recent analyses suggest
that a "status quo" Conrail would require well over $2 billion in additional Federal subsidies over the
next five years, exclusive of hundreds of millions of dollars in payments for labor protection.

Proposed Change
The Administration's proposal includes the following elements:
•

Abolish Conrail as a corporate entity and sell/transfer its properties to other railroads for
continued rail service in the Northeast.

•

Repeal Conrail's employee protection entitlements. A new employee protection package will
be proposed of much more limited scope.

•

Prepare to phase-out all funding for Conrail by the end of 1982. Conrail would be kept
essentially intact until Congress authorizes sales and transfers.

•

Delay expenditure of $100 million of a requested $300 million 1981 supplemental request until
1982, contingent upon assurances that solutions to the Northeast rail problem can be worked
out.

264

Rationale
Weaning Conrail from Federal subsidies is part of a general effort to reduce the public tax burden
and allow market principles to apply. The Federal cost of supporting Conrail has already exceeded
original estimates by 50%. These run-away subsidies should be brought under control quickly.
Given the unlikelihood of Conrail becoming self-sufficient in the foreseeable future, it is preferable to
have Conrail's properties acquired by other railroads operating in the private sector. Most of
Conrail's lines have traffic that can be profitably handled by other railroads. This wall also allow
Conrail's shippers to participate in the growing movement of railroad mergers, rather than being
isolated in a regional railroad cocoon.
The 1981 supplemental will keep Conrail intact this year and allow Congress sufficient time to enact
legislation to sell or transfer Conrail lines to other railroads.
Existing statutory lifetime employee protection is extremely expensive and provides Federally funded
benefits to rail workers not provided to workers in other industries.
Lacking changes, costs associated with this program could total $250-500 million annually in liabilities
whether Conrail is retained as a corporate entity or its lines are sold to acquiring railroads.

Key Facts About the Program
When Conrail was formed in 1976, it was the Government that assumed almost all the risks of the
enterprise: (a) the bankrupt railroads from which Conrail was formed were guaranteed payment for
the value of the properties transferred to Conrail; (b) States and localities were provided Federal rail
branchline subsidies to shield them from the impact of proposed line abandonments; (3) shippers
were protected by strict rate regulation by the ICC; and (4) organized labor was protected by ensuring
lifetime salary protection for all employees who worked for the predecessor railroads for five years or
more. In that context, it is not surprising that Conrail has failed to live up to its expectation of
becoming financially self-sufficient by 1979.
Conrail has sustained yearly net income losses every year since 1976. Probably the single most
significant factor in Conrail's inability to achieve its plan has been its failure to retain its traffic base.
While the plan creating Conrail anticipated annual traffic growth of about 2%, Conrail tonnage has
dropped by 17% from 1976 to 1980. Coal transportation is holding steady, but all other tonnage has
dropped precipitously (-23%). Among the reasons for the traffic decline are:
(a) stagnant
manufacturing output in Conrail's service area; (b) continuing modal shift from railroads to trucks;
and (c) inability of Conrail to position itself for growth in coal traffic.
Conrail compares favorably to other Eastern railroads in its ability to generate revenue from its traffic
base. Its revenue per ton mile, for example, outstrips other major carriers. However, its operating
expense per ton mile exceeds that of comparable carriers, and its total operating expense as a percent
of revenue is the highest of all major carriers.
Conrail's labor force is now shrinking. The employee totals declined from 94,000 in July 1978 to
80,000 in July 1980 (-15%). However, this employment decline has been matched by Conrail's traffic
decline, thereby largely canceling the cost savings. Additionally, the employment decline has
increased the Government's labor protection liabilities insofar as more of Conrail's employees have,
been downgraded or furloughed. This cost would soar if Conrail's workforce is further reduced, as
most parties suggest is necessary.
Governmental funding as a percentage of Conrail annual expenditures has ranged from 10-18%. For
all years aggregated, the uses of Federal funds have been as follows: 44% for track rehabilitation, 35%
for operating subsidies, 14% for capital improvements, and 7% for equipment purchase and
rehabilitation.
Conrail has projected that by 1984 it will need a positive cash flow of about $800 million to meet all
its track, capital improvements, equipment, and debt maturity needs. This means $1.0 billion of
annual cash flow improvement. It is difficult to see how this level of improvement can be achieved.

265

Cooperative Automotive Research Program
Agency: Department of
Transportation

Functional
Code: 401

Budget Reform
Criterion: 5
(S in millions)
1984
1983

1981

1982

12
6

17
12

34
17

-12
-6

-17
- 12

-34
-17

1985

1986

50
25

50
35

50
45

-50
-25

-50
-35

-50
-45

1985
-50
-45

1986
-50
-50

; proposal. Total savings expected are as follows:
1981
1982
1984
1983
—
-34
-50
-50
-17
-25
-35

Program Description
The Cooperative Automotive Research Program (CARP) was designed in cooperation with the U.S.
automotive industry to reduce the nation's dependence on foreign oil by financing a basic research
program aimed at accelerating the development of more fuel-efficient and technologically advanced
automobiles.
Funding was originally intended to be on a matching basis, with the Federal
Government providing half the resources. The matching arrangement was waived in fiscal year 1981
because of industry economic conditions. As a result, the 1981 program was to be wholly financed by
the Federal Government.

Proposed Change
The Administration has decided not to initiate CARP. The Reagan Budget proposes to rescind
uncommitted 1981 appropriations and to eliminate funding for 1982 and subsequent years.

Rationale
•
•
•

Federal financing of long-term research to benefit a particular industry is inappropriate.
The automotive companies, rather than the Federal Government, are in the best position to
decide what kind of research to undertake and when to do so.
The President's decision to decontrol the price of oil and the emergence of market incentives
for greater fuel efficiency, greatly reduced the need for CARP.

266

Great River Road
Functional
Code: 401

Agency: Department of
Transportation

Funding

($ in millions)

CARTER BUDGET:
Budget Authority
Outlays
REESTEVIATES & ADJUSTMENTS:
Budget Authority
Outlays
PROGRAM CHANGES: 17
Budget Authority
Outlays
REAGAN BUDGET:
Budget Authority
Outlays
1/

Budget Reform
Criterion: 5

25
36

-6

-15

-20

-19

-10

25
30

The Carter Budget already included savings for this proposal. Total savings expected are as follows:
1981
1982
1983
1984
Budget Authority
- -25
-25
-25
-46
-51
Outlays
-6
-19

6
1985
-25
-43

1986
-25
-35

Program Description
The Federal Highway Act of 1973 authorized the construction or reconstruction of the Great River
Road by the ten States bordering the Mississippi River. A single continuous route has been
designated which will run from Lake Itasca in Minnesota to Venice, Louisiana.
The Carter Budget proposed consolidating this program within the Federal-aid highway program
beginning in 1982.

Proposed Change
The Administration will defer previously authorized and available contract authority in 1981 (i.e., $17.7
million). The Administration's highway bill includes a provision that will lapse all remaining Great
River Road funding. All future work on the road will be performed with the States' regular
Federal-aid highway monies.

Rationale
To stretch out and retarget public sector capital improvement programs.
All segments of the Great River Road other than access spurs have been designated as being on the
Federal-aid system and may be improved using regular Federal-aid funds. The discrete Great River
Road program is duplicative and unnecessary.
The estimated cost to complete this highway is $1.4 billion (1979 dollars).

Key Facts About the Program
The program was established in the 1973 Highway Act. The 1978 Highway Act provided $25
million/year in new contract authority for 1979 through 1982. In addition, $10 million per year of
general fund authorizations were provided for off-system segments. Since there are no such segments,
these funds are not needed. The annual obligation of contract authority is controlled by an obligation
limitation included in the DOT Appropriation Acts. The annual limitation has been $37.5 million in
the last several years.
States Affected

Minnesota
Wisconsin
Iowa
Illinois
Missouri

Kentucky
Tennessee
Arkansas
Mississippi
Louisiana
267

Highway Construction Program
Agency: Department of
Transportation

Functional
Code: 151,401

Funding
1981
CARTER BUDGET:
Budget Authority
Outlays
REESTIMATES & ADJUSTMENTS:*
Budget Authority
Outlays
PROGRAM CHANGES:
Budget Authority
Outlays
REAGAN BUDGET:
Budget Authority
Outlays

1982

Budget Reform
Criterion: 5
($ in millions)
1983
1984

1985

1986

10.536
8,507

11,396
10,143

11,722
11,048

11,953
11,465

12,383
12,311

215
32

234
76

250
163

270
224

289
246

-7

-2,009
-429

-2,308
-1,534

-2,273
-1,955

-2,394
-2,019

-2,212
-2,148

9,207
8,755

8,742
8,110

9,322
8,686

9,699
9,256

98,830
9,670

10,460
10,409

9,207
8,762

^Transfer of the Appalachian Highway Program to the Department of Transportation beginning in 1982.

Program Description
The Federal highway program provides grants to the States for construction or reconstruction of
certain designated highway systems: Interstate, primary, secondary, and urban. Funds are also
provided for rehabilitation or replacement of highway bridges, highway safety projects, and numerous
small special categorical programs.
The Carter budget provided for major growth in the Interstate rehabilitation program from $1.4
billion in 1982 to $2.4B in 1986. The rural and urban programs were level funded at $.7 billion and
$.9 billion respectively.

Proposed Change
The Administration will focus the Federal highway program on the high Federal interest Interstate
and primary systems.
•

Interstate construction funding will be maintained basically at the currently authorized level,
but project eligibility will be narrowed to move toward final "completion" of the Interstate
system.

•

Interstate rehabilitation (4R) funds will be increased in 1982 by $525 million above the
existing authorized level.

•

Lower priority highway programs designed to address State and local problems will be
eliminated. The larger rural and urban programs will be phased out to allow States to adjust
their programs to meet their greater responsibility.

Outlay savings of $430 million in 1982 and $8.0 billion for 1982-1986 will be attained.

Rationale
To stretch out and retarget public sector capital improvement programs.
These changes are needed because:
•

The Federal interest is primarily supporting and providing for interstate commerce and the
national defense. This interest is best served by the Federal Interstate and primary highway
programs. In the present economic situation, and for the foreseeaable future, Federal
emphasis must be concentrated on these interests (and systems).

•

Highway programs designed to meet basically State or local concerns (e.g., secondary and
urban) are properly the responsibility of these governmental entities.
It is at these
governmental levels that the real need, priority, and appropriate funding for projects
designed to address particular State or local problems can be determined.

268

•

The goal of completing the Interstate highway system cannot be reached without a major
restructuring of this program. The growing cost of completion (i.e., $54 billion in 1979
prices) makes it mandatory that the Federal Government focus this program on completing
unbuilt gaps in the system and upgrading only those segments which are necessary to ensure
a minimum level of service.

Key Facts About the Program
The Administration's highway legislation is as follows:
•

Authorizations ($ in billions):
Actual
1981

Carter
1982

Proposed
1982

Federal-Aid Highways
(Contact Authority):
3.5
3.3
3.625
Interstate Const.
1.4
.275
.8
Interstate 4R
Primary
1.8
1.5
1.8
.7
.7
.6
Secondary
.9
.8
.9
Urban
.405
.5
Safety
1.3
1.2
.9
Bridge
.15
ER
.15
.15
Other
.143
.05
.05
10.2
9.098
8.3
Total
(8-75)
(8.15)
(10.05)
Obligation limitation
Interstate Substitu—
.2
.3
tion (highways):
*
*
Appalachian highways:
.215
*$215 million included in Appalachian Regional Commission budget

1983

1984

1985

3.625
1.3
1.7
.3
.5

3.625
2.0
1.8

3.625
2.1
1.8

1.2
.15
.05
8.825
(8.675)
.225
.234

1986
3.625
2.7
1.8
—

—
—

—

1.4
.15
.05
9.025
(8.875)
.375
.250

1.4
.15
.05
9.125
(8.975)

1.4
.15
.05
9.725
(9.575)

.375
.270

.375
.289

Major program changes.
•

Interstate Completion
Under the existing definition of completion of the Interstate the cost-to-complete estimate is
$53.8 billion ($48.6 billion Federal share). With inflation, the system as defined can never be
completed.
The Administration has established the policy that the Interstate highway system will be
completed within existing authorizations and by the statutory 1990 deadline, and has
proposed to redefine system completion.
Beginning October 1, 1981, Interstate construction funds will be available only to construct
Interstate segments to a minimum level of acceptable service consisting of (1) full-access
control, (2) a pavement designed to accommodate traffic anticipated for the next 20 years,
and (3) a design of not less nor more than four lanes in rural areas and all urban areas and
urbanized areas under 400,000 population, and up to six lanes in urbanized areas over
400,000 population. Future Interstate Cost Estimates would include only costs for the projects
eligible under these criteria.
To ensure cost effective use of Interstate funds, the Secretary of Transportation would
examine all Interstate System segments on which physical construction has not started to
identify possible segments which are not essential to the unified and connected Interstate
System, are not cost effective or are environmentally disruptive. The Secretary would be
authorized to remove undesirable, nonessential segments from the Interstate System, which
would then create authority for Interstate Transfer grants for those segments otherwise
eligible.

•

Interstate Rehabilitation (4R)
An expanded program of Interstate resurfacing, restoration, rehabilitation and reconstruction
(4R) will be undertaken. Funding will increase by almost 300% in 1982 over 1981. Similar to
the Interstate completion program, the Federal Government will pay 90% of the cost for 4R
projects.
Projects made ineligible for Interstate completion funding by the redefinition of Interstate
completion will become eligible for I-4R funds.

269

Primary and Bridge
The primary and bridge programs will be retained and funded at the authorized levels of
$1.5 billion and $.9 billion in 1982.
Secondary and Urban Systems
State and local governments have a greater interest than the Federal Government in highway
systems below the Interstate and primary systems. To return responsibility for these highways
to the appropriate level of government, phase out of Federal responsibility for, and
involvement in, the secondary and urban system programs is proposed. To facilitate the
transistion, the Administration proposes authorizations for these programs for fiscal years
1982 and 1983. These transition authorizations should provide the States time to make
budget adjustments to assume full funding responsibility for these programs.
Safety
Highway safety projects should be an integral part of all highway construction. To increase
State and local flexibility in meeting highway safety needs, elimination of separate safety
categorical programs administered by the Federal Highway Administration is proposed.
Funding that would otherwise be authorized for safety projects is incorporated into the larger
highway system catgories, as safety projects are eligible for these funds.
Other
The Administration proposes elimination of a number of existing categorical highway
programs and the existing separate 1982 funding authorizations associated with them. States
will be able to make their own determinations as to the priority of these programs, most of
which will be eligible for Federal funds under the regular primary, secondary or urban
programs. The Appalachian Development Highway System program would be transferred
from the Appalachian Regional Commisssion and would be financed from the Highway
Trust Fund.
Funding
The Administration proposes a simple extension of the existing highway user taxes and the
Highway Trust Fund. The taxes will be extended to 1989 and the trust fund to 1990.

270

Highway Safety (402) Grants
Agency: Department of
Transportation

Functional
Code: 401

Funding

($ in millions)
1984
1983

1985
1986
CARTER BUDGET:
244
264
202
239
215
255
Budget Authority
241
244
200
237
218
229
Outlays
REESTIMATES & ADJUSTMENTS:
Budget Authority
Outlays
PROGRAM CHANGES:
-167
-125
-162
Budget Authority
-138
-178
—
-47
-112
Outlays
-138
-150
-163
REAGAN BUDGET:
264
77
77
77
77
77
Budget Authority
194
200
87
106
91
Outlays
81
1/ In 1981 and 1982 budget authority represents contract authority and does not accurately reflect a lower obligation limitation of
$189 million in 1981 and $177 million in 1982. Budget authority and obligations are the same in the outyear. The table listed
below under proposed change provides a better assessment of obligation savings.
1981

1982

Budget Reform
Criterion: 6

Program Description
Federal grants are provided to States and localities for:
•

Establishing or supplementing highway safety programs in such areas as traffic enforcement,
driver licensing and education, alcohol abuse and pedestrian safety.

•

Increasing police patrols, equipment, and public information activities relating to 55 mph
speed limit enforcement.

Proposed Change
The Administration has proposed legislation to restrict eligibility to programs that have been
successful in promoting highway safety and are an appropriate Federal function. This proposal should
produce outlay savings of $45-160 million per year beginning in 1982 and extending to 1986. The
authority:
($ in millions)
1981
Basic grants
55 MPH
Innovative grants
Total obligations saved

1982
58
40
2
100

1983
71
50
4
125

1984
84
50
4
138

1985
98
60
4
162

1986
114
60
4
178

Rationale
•

The Federal contribution to total highway safety funding is so small (2 to 3 percent) that the
Federal Government has had little impact on what State and local governments actually do.

•

A General Accounting Office (GAO) study of the Highway Safety Grants Program
concluded that there is no evidence of the effectiveness of many of the categories of grants in
reducing highway fatalities and that many potentially effective projects were not implemented
by the States.

•

Enforcement of maximum highway speed limits (i.e., 55 MPH) should be a discretionary
responsibility of the States.

Key Facts About the Program

•

The Highway Safety bill authorizes financial assistance to carry out State safety programs,
but fails to establish any goals to be achieved.

•

The following are programs of proven success in promoting highway safety: police traffic
sendees, alcohol safety, emergency medical services, traffic records.

271

Highway Safety Program
(Research, Development, Regulations)
Agency: Department of
Transportation

Functional
Code: 401

Funding
CARTER BUDGET:
Budget Authority
Outlays
REESTEMATES & ADJUSTMENTS:
Budget Authority
Outlays
PROGRAM CHANGES:
Budget Authority
Outlays
REAGAN BUDGET:
Budget Authority
Outlays

Budget Reform
Criterion: 5
(S in millions)
1984
1983

1981

1982

87
85

112
100

119
107

-19
-5
93
95

87
85

1985

1986

132
119

137
124

146
136

-23
-13

-25
-21

-25
-24

-26
-24

96
94

107
98

112
100

120
112

Program Description
The operations and research budget of the National Highway Traffic Safety Administration includes
the following major program areas:
•

Rulemaking program — promulgation of Federal vehicle safety and fuel economy standards.

•

Enforcement programs — enforcement of vehicle safety standards and to do compliance
testing and defects investigation.

•

Highway safety programs — provides Federal staff support and demonstration programs to
assist the States in the conduct of highway safety programs.

•

Research and analysis — provides research and development in support of all NHTSA
programs, including the collection and analysis of data. Provision is also made to furnish the
scientific and technical basis for motor vehicle standards.

Proposed Change
Reduce budget authority in 1982 by $19.2 million to reflect reduced emphasis on Federal regulations.

Rationale
•

Excessive regulation is a significant factor in our current economic difficulties.

•

The emergence of market incentives for greater fuel efficiency, greatly reduces the need to
develop fuel economy standards beyond 1985.

Key Facts About the Program
The following is a list of the specific program reductions ($ in millions):
1982 Carter budget

112.3

•

Fuel Conservation
Eliminate Carter energy initiative to publicize fuel
conservation techniques, such as not "peeling away" from
STOP signs.

-4.7

•

Economic and Technology Assessment
Eliminate unnecessary analysis and support of post-1985
fuel economy standards.

-6.0

•

Integrated Vehicle Systems
Postpone development of a new 1800 pound vehicle prototype.
Eventual cost of this project could reach $20 million over the next
3-5 years.

-2.5

272

•

Rulemaking
Eliminate rulemaking for post-1985 fuel economy standards
and eliminate expansion in rulemaking.

-1.0

•

Data collection
Reduce the number of data collection sites from 75 to 60.

-4.0

•

Highway safety

-1.0

Eliminate the National Driver Register.
Total reduction

(19.2)

1982 Reagan budget

93.1

273

Northeast Corridor Improvement Project Reduction
Agency: Department of
Transportation

Functional
Code: 401

Funding
CARTER BUDGET:
budget Authority
Outlays
REESTUMATES & ADJUSTMENTS:
Budget Authority
Outlays
PROGRAM CHANGES:
Budget Authority
Outlays
REAGAN BUDGET:
Budget Authority
Outlays

Budget Reform
Criterion: 4
($ in millions)
1983
1984

1981

1982

350
373

488
465

172
534

20
316

15
152

-25

-288
-155

13
-114

-20
-1

-15
-15

350
348

200
310

185
420

—
315

—
137

1985

1986
—

Program Description
The Northeast Corridor Improvement Project (NECIP) is intended to improve passenger service
between Washington, D.C. and Boston, Massachusetts. It is to facilitate safe, dependable, and high
speed rail passenger service on that Corridor. The project includes track improvement, bridge repair,
elimination of grade crossings, station improvement, and electrification, as well as installation of
signalling and communication systems and railway maintenance facilities.

Proposed Change
The Administration proposes to reduce total authorizations for NECIP by $310 million, from $2.5
billion to $2.19 billion, and to change the focus of the Project. In the past, faster train speed has been
a high priority criterion in the choice of construction improvements. In revising the project, emphasis
will be placed on completing a reliable and serviceable rail system.

Rationale
•

Several expensive components of NECIP — electrification north of New Haven, replacement
of the signalling system, curve realignments — have been included in the project largely in
order to reduce trip times. Even with these improvements, however, the trip times achieved
in the early 1970's, before the project was started, would fall only 20 minutes between New
York City and Washington, D.C. (They would fall 50 minutes between New York and
Boston.)

•

The purpose of increasing train speed has been to attract additional riders to the corridor.
But fiiel costs continue to increase demand for rail service in this section of the country,
thereby largely accomplishing what NECIP planned to spend hundreds of millions "to
accomplish.

•

High speed track is much more expensive to maintain than is medium speed track. If
requires more frequent resurfacing and repair. It is unlikely that Amtrak will be able to
fund this work in the future. If Amtrak cannot, the huge initial expense will thus be wasted
as the track deteriorates.

•

Three times as many commuter passengers use the Northeast Corridor as do intercity
passengers. Yet NECIP, by focusing on increased speed, benefits the minority of users at
great expense. Commuter trip times fall negligibly with high speed trains because distances
are short and stops frequent.

•

By redirecting the program now, only $30-40 million will be lost in contracts already let.

274

Key Facts About the Program
The $310 million reduction will be achieved mainly by repairing rather than replacing the signalling
system and by eliminating electrification north of New Haven.
SIGNALLING SYSTEM
—

The originally planned signalling system for NECIP was estimated in early 1981 to cost $393
million. With each estimate the cost has increased significantly; the initial cost estimate had
been $50 million. A consulting firm hired by the Department of Transportation estimates
that the total cost of the system would be closer to $600 million.

—

The Department of Transportation's original plan was to replace the existing signal system
with one of the most elaborate systems in existence. The reason for this was to make it
possible to run high speed intercity, commuter, and freight trains on the same track. It was
thought that the combination of high speed and low speed traffic on the corridor made it
necessary for trains to be able to make extreme changes in speed over short distances.

—

Almost without exception, the portions of the corridor which are heavily travelled have four
tracks. High speed traffic can be consistently routed to the inside tracks, low speed traffic to
the outside tracks. This eliminates the need for a signal system allowing extreme changes in
speed over short distances.

—

Commuter authorities have resisted replacement of the signalling system. They would not
benefit from it, but would have to install new equipment in all their trains in order to use
the new system, as would freight trains.

ELECTRIFICATION NORTH OF NEW HAVEN
— FRA had planned to electrify north of New Haven to save fuel and to eliminate a 10 minute
delay as locomotives are switched.
—

The estimated cost of this electrification is $190 million. Demand for rail service is low
between New Haven and Boston when compared with demand elsewhere on the corridor.

275

Railroad Branchlines
Agency: Department of
Transportation

Functional
Code: 401

Funding
CARTER BUDGET:
Budget Authority
Outlays
REESTEVIATES & ADJUSTMENTS:
Budget Authority
Outlays
PROGRAM CHANGES:
Budget Authority
Outlays
REAGAN BUDGET:
Budget Authority
Outlays

Budget Reform
Criterion: 4
($ in millions)
1984
1983

1981

1982

80
56

80
80

87
110

-80

-32

1985

1986

94
105

101
110

108
112

-87
-57

-94
-75

-101
-98

-108

-106

Program Description
This program provides formula grant assistance to States for rail planning and for support of rail
service on low traffic branchlines. The funds have been used for temporary operating subsidies, track
acquisition and rehabilitation, rail planning, construction of sidings, terminals and the like. The
program was intended to cushion shippers from the effects of potential or actual rail abandonments.

Proposed Change
The Administration proposes program phase-out starting in 1981. This, will be accomplished by
legislatively reprogramming $80 million in 1981 appropriations for use for other railroad assistance
programs for which supplemental 1981 appropriations otherwise would have been required.

Rationale
This action returns to States and localities a program whose benefits are primarily local.
reasons are as follows:

Additional

•

Traffic on the supported lines is so light that interstate commerce will not be disrupted. The
supported lines carry less than 0.5% of nationwide rail traffic.

•

Over 25% of funds are allocated to States that have little or no branchline rail sendee
problems.

•

A soon-to-be released DOT Inspector General report criticizes the program because many
rail lines being subsidized will subsequently be abandoned.

Key Facts About the Program
•

The railroad branchline program was originally authorized in 1976. At that time, 21,000 miles
of rail lines were eligible for assistance, and the program was supposed to expire in 1981.

•

Since then, the program's authorizations have been increased and extended through 1982.
Also, the total rail line miles eligible for assistance has exploded to about 100,000 miles.

•

Whereas the program was originally intended to help States retain service on lines not
included in Conrail when Conrail was formed in 1976, now the program is nationwide in
scope.

•

Most of the low traffic lines being subsidized carry less than 3 million gross tons per mile
annually, although lines up to 5 million gross tons per mile can qualify.

276

•

Biggest recipients are as follows (1981 allocations):
— Iowa ($9.4 million)
— Illinois ($5.0 million)
— Wisconsin ($4.1 million)
— Minnesota ($4.0 million)

•

—
—
—
—

South Dakota ($3.8 million)
Texas ($3.7 million)
Michigan ($3.4 million)
Oklahoma ($3.0 million)

All States are guaranteed no less than 1% of funding allocations. That means that some
States which have no railroad abandonment problem — such as Alaska, and Washington,
D.C. — are nevertheless guaranteed $800 thousand under an $80 million program.

277

Railroad Restructuring Assistance
Agency: Department of
Transportation

Functional
Code: 401

Funding
1981

1982

Budget Reform
Criterion: 4
($in millions)
1984
1983

1985

1986

CARTER BUDGET:
Budget Authority
Outlays
REESTIMATES & ADJUSTMENTS:
Budget Authority
Outlays
PROGRAM CHANGES:
Budget Authority
Outlays
REAGAN BUDGET:
Budget Authority
Outlays
17

751/

105

150
136

164
202

178
210

191
220

204
188

—

-40
-5

-54
-30

-68
-55

-81
-70

-204
-90

110
131

110
172

110
155

110
150

7 5 1/

105

With $76 million in 1980 unobligated balances, 1981 obligations will total $151 million.

Program Description
This program entails Federal purchase of railroad preferred stock to finance specific improvement
projects, especially track rehabilitation. Funds are provided to railroads that cannot obtain funds
elsewhere. The preference shares have a maximum term of 30 years, with deferral of repayments up
to 11 years. The priority of payment in bankruptcy is below all creditors. Through 1980, 70% of funds
have been provided to the Chicago and North Western and the Illinois Central Gulf.

Proposed Change
•

The funding level is reduced by $40 million in 1982 held at $110 million for three additional
years and terminated in 1986.

•

The 1981-82 program will focus available funding on rail restructuring in the Midwest in the
wake of the Rock Island and Milwaukee Railroad bankruptcies.

•

The 1983-1985 program anticipates assistance to encourage other railroads to acquire Conrail
lines, assuming that Conrail's lines will be sold to other railroads.

Rationale
Phase down of this program is part of a general effort to reduce the public tax burden and allow
market principles to apply. Additional reasons are as follows:
•

There are other forms of Federal assistance, such as loan guarantees, to assist troubled
railroads maintain essential rail services.

•

Compared with other forms of Federal railroad assistance, this program entails an extremely
high subsidy rate. It carries an effective interest rate of only 2% (yield to maturity).

•

There is a lessened need for railroad assistance now that a reasonably strong rail deregulation
bill has been enacted (Staggers Rail Act of 1980).

Key Facts About the Program
•

Results from the program are modest. In a 1980 report, GAO asserted that "Federal
assistance solely to overcome deferred maintenance is not essential."

•

Obligation rates have lagged funding availability. For example, in 1980 DOT obligated only
half the funds available to it ($74 million obligated out of $146 million available).

•

DOT has plentiful loan guarantees available for railroad restructuring purposes ($300 million
in 1981; $320 million in 1982).

278

•

Funding recipients to date include the following:
— Illinois Central Gulf — $166 million
— Chicago and North Western — $148 million
— Milwaukee — $53 million
— Southern Pacific — $49 million
— Boston and Maine — $26 million
— All other — $15 million

The first two railroads account for 70% of total obligations; the first four railroads account for 90%.
•

Most railroad stocks have done very well since enactment of rail deregulation legislation.
Many of those railroads that the Government has supported may now raise funds by selling
equities. For example, stock of the Chicago and North Western has tripled in the past year,
thereby greatly enhancing that railroad's ability to raise funds without Federal aid.

279

Urban Mass Transit Capital Assistance
Agency: Department of
Transportation

Functional
Code: 401

Funding
1982

1981
CARTER BUDGET:
Budget Authority
Outlays
REESTIMATES & ADJUSTMENTS:
Budget Authority
Outlays
PROGRAM CHANGES:
Budget Authority
Outlays
REAGAN BUDGET:
Budget Authority
Outlays

Budget Reform
Criterion: 5
(S in millions)
1983
1984

1985

1986

3,590
2,768

3.830
2,850

4,350
3,270

242

-150

-250
-54

-1.340
-420

-1,635
-805

-1,795
-1,153

-1,845
-1,535

-1,860
-1,649

3,340
2,956

2,490
2,441

2,715
2,315

2,850
2,462

3,000
2,385

3,150
2,516

4,645
3,615
— —

4,845
3,920
-

—

5,010
4,153
~

—

Program Description
The mass transit capital grant program consists of the following:
•

Section 3 Discretionary Capital Grants

•

Section 5 Formula Bus Grants (Tier IV)

•

UMTA Interstate Transfer Grants

•

National Capital Transportation Act Grants

The Carter budget projected increasing funding levels by 50% by 1986 over the 1981 Congressionally
enacted level.

Proposed Change
The revised budget reduces funding levels for mass transit capital grants. The budget savings are
primarily achieved by reducing the amount of funds for constructing new rail transit systems and
extending existing systems. The revised budget provides funds for improving transit services through
grants to purchase buses and to update existing rail systems — particularly in large, concentrated
urban areas. The construction of new rail transit systems and extensions of existing systems has not
proved, however, to be as cost-effective as less capital intensive projects. Federal assistance for such
rail construction projects will be postponed at least until the economic situation and the condition of
the Federal budget improve.
Specifically, the revised budget emphasizes the following:
•

The central focus of the Federal transit assistance program in the future will be on the
maintenance and improvement of existing, proven transit systems.

•

New rail transit systems and planning activities associated with such systems will no longer be federally financed.

•

Transit systems for which the Federal Government has issued formal letters of intent and
where construction is underway (including Washington Metro) will be financed to complete
operable transit segments.

•

Downtown People Mover and Urban Initiatives projects will be terminated immediately, but
Urban Initiatives projects already under construction will be completed.

Rationale
Primary responsibility for mass transit should remain with State and local governments.
In the present economic situation, Federal emphasis should be concentrated on maintaining existing
transit systems that have been proven effective and are an essential part of a large urban
transportation network.

280

The availability of steadily increasing Federal transit funding and Federal regulatory requirements has
sharply escalated new rail transit systems costs. Federally financed rail systems are often built with
extravagant features; construction wages paid are sometimes excessively high due to Federal laws; and
routes are added where they are not justified from an economic point of view. The five rail system
construction projects now underway that receive Federal assistance (Washington, Miami, Buffalo,
Baltimore, and Atlanta) require approximately- $75 million a mile to construct and equip for operation.
The same $75 million could be used to buy more than 500 buses. Also, in comparison, San Diego is
building and equipping a trolley line, without any Federal assistance, costing less than $6 million a
mile.
Transit system energy savings are nonexistent or small in the short run and too speculative in the long
run to justify major Federal investments on energy efficiency grounds. It has been estimated that
BART, the San Francisco Bay Area rapid rail system, required so much energy during its construction
that this initial energy investment may never be repaid. Traffic for new rail systems is primarily
generated from ex-transit bus users. No real energy, pollution, or congestion benefits are achieved
from switching riders between transit modes.

Key Facts About the Program
The obligations assumed for capital assistance are:
($ in millions)
1982
1981
A/
Section 31/
Section 5, Tier IV
Interstate Transfer^

1980
350

Total
l/

800

1725
375
600

3130

2700

Includes S210 million deferred from 1981 to 1982 in the Section 3 program.

^ Includes S182 million in grants for highway substitute projects in 1981. In 1982 all grants for such
highway projects will be funded in the FHWA budget.

281

Urban Mass Transit Operating Assistance
Agency: Department of
Transportation

Functional
Code: 401

Funding
1981
CARTER BUDGET:
Budget Authority
Outlays
REESTEVIATES & ADJUSTMENTS:
Budget Authority
Outlays
PROGRAM CHANGES 17 :
Budget Authority
Outlays
REAGAN BUDGET:
Budget Authority
Outlays

1982

1,105
750

1,105
780

150

142

1,105
900

1,105
922

Budget Reform
Criterion: 4
(S in millions)
1984
1983

1985

1986

1,105
1,005

1,105
1,080

1,105
1,100

1,105
1,130

-370
-208

-740
-512

-1,105
-899

-1,105
-1,088

735
797

365
568

201

Program Description
This program is comprised of the first three "tiers" of Section 5 formula grants. Historically, 90% to
95% of the funds distributed through the formulas of the first three tiers have been used for operating
expenses. The Federal share of the national total of transit operating expenses has been in the 15%
range over the last few years. The Carter budget would have continued funding for these three
operating tiers at the current 1981 levels through 1986.

Proposed Change
Beginning in 1983, funds provided
cushion the difficulties caused by
1984 would be taken in the "base"
funds in Tiers II and III which are

in the first three tiers would be phased out by 1985. In order to
this phase-out of Federal assistance, the reductions in 1983 and
tier — leaving untouched during the transition years the remaining
targeted more at the cities in immediate need.

Rationale
The costs of operating local mass transit systems should be the responsibility of the users and local
taxpayers.
Federal subsidies for operating costs are at least partially absorbed by lower productivity and reduced
fares.
Conventional transit systems on the average have to subsidize slightly more than 50% of the cost of
each ride through the local, state and Federal taxpayer. Furthermore, this national transit deficit is
escalating rapidly; cost increases from 1973 to 1978 average 13.2% a year while the average annual
fare increased only 3.5% over the same period.
Federal funds in some areas help to support marginally effective conventional transit services. Often
transportation needs could be better served by more cost effective and innovative alternatives such as
carpools, vanpools, subscription bus and jitney services.
Federal subsidies and the Federal "strings" attached to those subsidies tend to drive up operating
costs.
The undesirable side effects of Federal subsidies — lower productivity and unrealistically low fare
levels — could only be dealt with by an inappropriate level of Federal involvement in local decisions
about fares, wage rates, service levels and management practices. These decisions are better left for
local decision-makers.

282

Fares have generally not kept pace with inflation since the 1973 oil embargo, even though the cost of
the main alternative means of transportation — the private vehicle — has increased dramatically even
more than the rate of inflation. It is probable that the cost of owning and operating one's car will
continue to increase faster than the inflation rate; thus, transit fare could be raised considerably to
cover the loss of Federal subsidies without losing many patrons.
Transit operating subsidies for everyone — "rich and poor alike — are a terribly inefficient way to
assist particular disadvantaged groups such as the elderly, the poor, minorities, and youth. One
analysis estimated that only 23.5% of transit operating subsidies in 1975 went to low income
households.
A gradual phase out of Federal subsidies over the next four years provides time for cities and States
to adjust to the absence of Federal assistance. The phase out will not begin until 1983. By
concentrating the remaining funds in Tiers II and III, the cities with the most difficult problems will
generally have the longest time to adjust.

Key Facts About the Program
The following budget authority levels will be recommended:
Tier I
Tier II
Tier 111
Total

1981
850
165
_20
1105

1982
850
165
90
1105

1983
480
165
90
735

1984
110
165
_90
365

1985
0
0
0
0

1986
0
0

fi
0

Aggregate transit operating expenses have been increasing more rapidly than aggregate transit
revenues. About 1965 the national aggregate of transit operating expenses first exceeded revenues.
From 1965 to 1978 the ratio of total revenues to expenses fell from 99.2 to 48.0%. From 1973 to 1978
operating expenses rose $2.18 Billion, yet revenues have risen only a fifth of that amount ($464
Million).
An analysis of the cost increase demonstrates that, even considering expansion, transit cost increases
have far exceeded the general inflation rate. From 1973 to 1977, the G N P Implicit Price Deflator
rose 33.7%. Transit operating costs rose 69.7%. The increase in operating costs over the general
inflation rate cannot be entirely attributed to service expansion or increased ridership. Operating costs
per revenue vehicle mile rose 16.8% in constant dollar terms from 1973 to 1978. Operating costs per
passenger trip rose 15.6%. Average wage and fringe benefits have risen faster than the inflation rate.
In constant dollars, transit workers received 13.5% more in 1978 than 1973. Meanwhile, productivity
declined from 1973 to 1978 as labor costs per vehicle mile rose 20.7% from 1973 to 1978.

283

Department of the Treasury

285

Treasury Law Enforcement and Tax Administration Staffing
Agency: Department of
the Treasury

Functional
Code: 751,803

Funding'
1981
CARTER BUDGET:
Budget Authority
Outlays
REESTLMATES & ADJUSTMENTS:
Budget Authority
Outlays
PROGRAM CHANGES:
Budget Authority
Outlays
REAGAN BUDGET:
Budget Authority
Outlays
1/

1982

Budget Reform
Criterion: 8
($ in millions)
1984
1983

1985

1986

3,328
3,306

3,499
3,454

3,549
3,520

3,656
3,630

3,715
3,686

3,783
3,754

-35
-52

-125
-135

-213
-241

-335
-395

-452
-508

-564
-619

3,293
3,254

3,374
3,319

3,336
3,279

3,321
3,235

3,263
3,178

3,219
3,135

Figures included in table are the sum of personnel costs for tax administration and law enforcement bureaus (Internal Revenue
Service, Bureau of Alcohol, Tobacco and Firearms, U.S. Customs Service and U.S. Secret Service).

Program Description
Two of the most critical responsibilities of the Treasury Department are law enforcement and tax
administration. The Customs Service is charged with collecting customs dudes, recovering contraband,
and processing persons and cargo through ports of entry. The Secret Service protects designated
individuals and enforces the counterfeit and forgery statutes. In administering the laws imposing
excise taxes on certain commodities, the Bureau of Alcohol, Tobacco and Firearms (BATF) has both
revenue collection and law enforcement duties. The Internal Revenue Service likewise has joint tax
administration and enforcement responsibilities.

Proposed Change
Planned 1981 and 1982 employment and related funding in tax administration and law enforcement
programs will be reduced in most areas. While IRS will sustain the largest absolute reduction from
the Carter budget level, the revised budget for IRS provides a real increase in full-time permanent
positions of 655 in 1981 and 2,251 in 1982. This is a 3% increase over actual 1980 on-board levels of
71,525. This staff is the critical element of the organization and includes those employees engaged in
revenue producing programs. In addition, staff devoted to collection of unpaid tax accounts will
increase substantially, about 1600 workyears above the 1980 level. This staff increase is anticipated to
have a direct revenue yield of over $600 million.

Rationale
This proposal is part of the Administration's effort to reduce overhead and personnel costs.
Employment reductions in Treasury's tax administration and law enforcement functions will not.
disrupt these programs. These reductions are consistent with the President's economic recovery plan
calling for tax reductions, more efficient use of Federal resources and greater emphasis on State and
local governments' role in areas such as law enforcement.
IRS' need for staff increases in the enforcement areas will be obviated to a large extent by the change
in the marginal tax rates for individual taxpayers. This is the most effective and least onerous method
of achieving compliance. Compliance is best enhanced by fairness and even-handedness in the tax
administration system. Moreover, lower marginal tax rates will encourage those participating in the
underground economy to come above ground and report their income, and those who avoid tax
liability by abusive tax shelters to redirect activities into more productive investments.
The BATF employment reduction is directed at curtailing the Federal role in anti-cigarette smuggling
activities, investigation of explosives/arson incidents and regulatory aspects of the firearms program.
These activities are low priority primarily because of-the marginal impact they appear to have on the
occurrence of a particular crime, such as arson or explosives incidents; the small programmatic payoff
compared with the regulatory burden as in the case of the regulation of firearms dealers; and the fact

287

that some of the problems they sought to combat are no longer a major Federal law enforcement
issue, such as over-the-road bootlegging of cigarettes.
While a portion of the Customs Service reductions will be taken in the processing of persons and
cargo through the ports of entry, the impact should not be severe, particularly as new and streamlined
ways of doing business are developed. Customs has been encouraged to implement new procedures
(such as "one-stop processing" and "citizen by-pass"), to be more selective in the inspection process
and in the longer term, develop new technologies (such as the mass spectrometer for narcotics
detection) for more efficient and effective processing rather than rely mainly on increased employment
levels.
The U.S. Secret Service's employment increases from 1980 actual levels in response to new and more
demanding responsibilities connected with the protection of the new President's family and an
additional former President's detail.

Key Facts About the Program
IRS program outputs for 1982 will be:
•

Processing of 148 million tax returns.

•

Auditing of 1,954 thousand tax returns and making 871 thousand contacts through IRS
service centers, with an associated revenue assessments of $7.2 billion.

•

Disposing of 2,252 thousand unpaid tax accounts, with associated revenue collected of
around $6 billion.

The 1982 revisions for the Bureau of Alcohol, Tobacco and Firearms reduced employment by 570
positions, or slightly more than 15% from the January budget estimate.
The 1982 revisions for the U.S. Customs Service reduced employment by 1,168 positions or 7.7% from
the January budget. The largest portion of these reductions will be achieved through decreases in
field support and overhead staff; only 92 inspector positions will be reduced under the current plan.

288

Environmental Protection Agency

289
3 4 4 - 2 1 1 0 - 81 - 10

Clean Lakes, Great Lakes, Chesapeake Bay
Program Reductions
Agency: Environmental Protection
Agency

Functional
Code: 304

Funding
CARTER BUDGET:
Budget Authority
Outlays
REESTIMATES & ADJUSTMENTS:
Budget Authority
Outlays
PROGRAM CHANGES:
Budget Authority
Outlays
REAGAN BUDGET:
Budget Authority
Outlays

Budget Reform
Criterion: 6
($ in millions)
1984
1983

1981

1982

27
27

25
25

22
24

22
22

-20
-7

-18
-13

-18
-17

-18
-18

-18
- 18

5
18

4
11

4
5

4
4

27
27

1985

1986

Program Description
CLEAN LAKES:
•

This program provides grants to States and municipalities for cleaning up polluted lakes.

GREAT LAKES:
•

This program provides research funds for studies of the Great Lakes ecosystem.

CHESAPEAKE BAY:
•

A Congressionally mandated five-year study of the Bay ecosystem that will be in its sixth
year in 1982..

Proposed Change
CLEAN LAKES:
•

Funding for this program is eliminated.

GREAT LAKES:
•

Funding for research is eliminated, but resources in support of the U.S./Canadian
Agreement are maintained.

CHESAPEAKE BAY:
•

Funding for future research is eliminated as the program comes to completion, but resources
to finalize the five-year project remain.

Rationale
These are among those activities that, in normal circumstances we might continue funding, but which
cannot be given high priority in times of servere economic strain. While resources for all three
programs have either been reduced or eliminated, it should be emphasized that EPA's regulatoryprograms will remain the primary mechanism for water pollution control in these specialized areas.
CLEAN LAKES:

•

This program has primarily benefited the private landowners surrounding lakes. It is
primarily a recreation, not a health-based program, and therefore, not part of the Agency's
primary health mission. The causes of lake pollution can be, and generally are, attacked
through EPA's nationwide water pollution program which is aimed at correcting the causes
of water pollution.
291

GREAT LAKES:
•

Research on Great Lakes pollution has been funded for nearly a decade. It is now time to
reassess this program before additional research on the Great Lakes is undertaken.
Therefore, specialized research support is eliminated but resources to support the
International Joint Commission with Canada remain.

CHESAPEAKE BAY:
•

The five-year Congressional mandate will be fulfilled in 1982 with the fmalization of reports.
Resources for program completion are maintained, but continued research funding is
inappropriate .until the results of the past five years are implemented.

Key Facts About the Program
CLEAN LAKES:
•

More than 200 grants have been awarded to inventory, diagnose, and correct pollution
problems in publicly-owned freshwater lakes.
More than 120 projects have involved
implementation of pollution controls.

•

Many States have developed their own programs for protecting and restoring lakes.

•

About $70 million has been appropriated since 1976 for this program.

GREAT LAKES:
•

Continuing general water quality research will benefit the Great Lakes, as well as other water
bodies.

•

More than 37 academic or research institutions, primary in nearby areas, have received $23
million in EPA research grants over the last eight years.

CHESAPEAKE BAY:
•

Resources remaining will be more than sufficient to disseminate program results to the
public.

•

More than 40 academic or reserach institutions have received about $19 million in EPA
research grants over the last five years.

292

Energy Research and Development
Functional
Code: 271

Agency: Environmental Protection
Agency

Funding
1982

96
96

88
88

oo oo
oo
oo

($ in millions)
1984
1983

1981

oo oo
oo oo

CARTER BUDGET:
Budget Authority
Outlays
REESTIMATES & ADJUSTMENTS:
Budget Authority
Outlays
PROGRAM CHANGES:
Budget Authority
Outlays
REAGAN BUDGET:
Budget Authority
Outlays

Budget Reform
Criterion: 6

-35
-10

-35
-18

-35
-35

53
78

53
70

53
53

—

96
96

1985

1986

Program Description
EPA's Energy R&D program focuses on assessing the environmental and health effects of new and
conventional energy technologies. The R&D program also evaluates various control technologies
available for industries to meet environmental standards.

Proposed Change
For the EPA energy research and development program, the Administration proposes:
•

To reduce research on pollution control technologies for oil shale development;

•

To reduce research on alternative energy sources which have not shown adverse
environmental effects—including solar, geothermal, and energy conservation; and

•

To reduce research for energy-related pollutants which are also studied in the broader
context of the Agency's research and regulatory programs.

Rationale
This proposal is an integral component of the Administration's overall effort to maintain fiscal
restraint on Federal programs.
Research that can reasonably be expected to be done by the private sector is proposed for reduction,
as is further research on alternative energy sources which have demonstrated little adverse
environmental impact. Reductions were also made where the prioritory energy research needs of the
Agency could be met through Agency base programs.

Key Facts About the Program
Research related to the most significant adverse environmental effects of energy development is
funded, including synfuel and coal pollution control technologies for SO x and NO x emissions.
Funding levels for acid rain research and long-range air pollution transport are not reduced from the
Carter FY 1982 request of over $9.0M.
Research no longer performed by the Agency, but which will be performed by the private sector,
includes work on oil shale waste stream characterization..
Low priority research on .SOx and NO x , such as the environmental effects of those pollutants on
crops, has been eliminated.

293

Regulatory Program Reductions (Agencywide)
Agency: Environmental Protection
Agency

Functional
Code: 304

Funding
1982

1981
CARTER BUDGET:
Budget Authority
Outlays
REESTIMATES & ADJUSTMENTS:
Budget Authority
Outlays
PROGRAM CHANGES:
Budget Authority
Outlays
REAGAN BUDGET:
Budget Authority
Outlays

1,243
1,180

1,276
1,285

Budget Reform
Criterion: 8
(S in millions)
1984
1983

1985

1986

1,320
1,317

1,355
1,319

1,390
1,357

1,421
1,386

-44
-19

-78
-44

-113
-80

-144
-109

-21
-21

-150
-90

-150
-123

-150
-140

-150
-150

1,222
1,159

1,126
1,195

1.126
1,175

1,127
1,135

1,127
1,127

Program Description
The Environmental Protection Agency is charged with administering programs for the regulation of
air, water, drinking water, hazardous waste, pesticides, radiation, noise, and toxic substances. Included
in these programs are research, enforcement and administrative activities that support the regulatory
effort.

Proposed Change
Reductions have been proposed in all Agency regulatory programs. Workyears have been cut by 686
in 1981 and 1,222 in 1982. Major changes include:
•
The phase-out of the noise program;
Cutbacks in energy research; and
•
•
Reductions in management overhead.
Although resources to promulgate new regulations will be reduced, budget authority for enforcing
existing regulations in 1982 will be increased over the 1981 level. Funding for State grants will also
increase over 1981, rising by $4 million to $228 million in 1982.

Rationale
These reductions have been proposed in order to reduce Federal overhead and personnel costs, as
well as program waste and inefficiency. They will also eliminate resources for marginal regulatory
activities which either unnecessarily impose costs on business or are better handled at the State or
local level. EPA will focus its current and future regulatory efforts on only the most important
regulations, those that protect the public from toxic pollutants and chemicals.

Key Facts About the Program
The following table shows the 1982 Budget authority reductions in EPA's regulatory-related programs
by medium:

(Dollars in Millions)
CARTER
BUDGET

MEDIA

Air
Water
Drinking Water
Solid Waste
Pesticides
Radiation
Noise
Intermedia
Toxics
Energy
Regulator Council
Management
TOTAL

255
204
92
137
72
17
13
16
107
97
3
263 •
1,276

294

REDUCTION

-16
-21
-4
-17
-10
-4
-11
-1
-9
-27
-3
-27
-150

REAGAN
BUDGET

239
183
88
120
62
13
2
15
98
70
0
236
1,126

Superfund
Agency: Environmental Protection
Agency

Functional
Code: 304

Funding
CARTER BUDGET:
Budget Authority
Outlays
REESTEV1ATES & ADJUSTMENTS:
Budget Authority
Outlays
PROGRAM CHANGES:
Budget Authority
Outlays
REAGAN BUDGET:
Budget Authority
Outlays

Budget Reform
Criterion: 8
($ in millions)
1984
1983

1981

1982

117
59

250
183

374
312

428
401

358
393

0
0

0
-17

0
-50

0
-67

0
-58

0
-25

0
+ 297

-10
-5

-50
-30

-49
-50

-28
-38

+42
+7

+ 277
+69

107
37

200
103

325
195

400
305

400
375

277
366

1985

1986

Program Description
Superfund, enacted in December 1980, is a new program that provides for comprehensive response to
hazardous substance spills and uncontrolled hazardous waste sites. The program will be paid for out
of a trust fund which will be financed primarily through industry taxes. Initial implementation will
begin in 1981 and include emergency response and longer-term remedial construction work on several
sites.

Proposed Change
The Reagan Budget proposes minor reductions to the levels requested in the Carter Budget for this
new program. The FY 1981 funding level is reduced by $10 million and the FY 1982 funding level is
reduced by $50 million. The technical reestimate of outlays is because EPA now believes that the
average time to clean up an abandoned site, and therefore the timing of expenditures, will be longer
than previously estimated.
This Administration plans no interruption in the program and supports its implementation. The
funding reductions are commensurate with shifts in program emphasis from those assumed in the
January Budget. These shifts will result in a more cost-effective program and include:
•

A full partnership with the States rather than a massive direct Federal program—using the
States' existing capabilities wherever possible;

•

A major effort to get responsible private parties to clean up their own sites, using the Fund
only for sites where responsible parties cannot be found or refuse to take action; and,

•

A major emphasis on recovering monies to the Fund so that more abandoned waste sites can
be fixed in the long run.

Rationale
This action maintains the full ability to respond to environmental emergencies and to initiate clean-up
activities. The effectiveness and integrity of the program is enhanced and is done so at lower costs.
In the long run, more abandoned waste sites will receive clean-up and maximum cost-effectiveness
will be ensured.

295

Key Facts About the Program

Carter
1981
(S117M)
Removal Response:
Sites
Spills

u\\o
ooo
I—*

The following chart compares key output estimates under the Carter and Reagan budgets.
Reagan output levels reflect the policy shifts discussed above:
Reagan
1981
1982
(S107M)
(S200M)

50
113

80
225

50
113

50
205

Cost Recovery Cases as a
Percentage of potential
Workload:
Sites
Spills

31
36

80
41

36
27

88
15

Private Party Clean-up Actions:

Remedial Response:
Sites Only

State % of Total
Response Workload

296

Wastewater Treatment Grants
Agency: Environmental Protection
Agency

Functional
Code: 304

Funding
1981
CARTER BUDGET:
Budget Authority
Outlays
REESTEVIATES & ADJUSTMENTS:
Budget Authority
Outlays
PROGRAM CHANGES:
Budget Authority
Outlays
REAGAN BUDGET:
Budget Authority
Outlays
2/

3,305
4,200

1982
3,700
4,230

Budget Reform
Criterion: 5
($ in millions)
1984
1983

1986

1985

4.000
4,400

4,400
4,425

4,700
4,350

5,000
4,375

-1,600
-1,450

-2,000
-2,270

-2,300
-2,270

-2,600
-2,275

2.400
2,950

2,400
2,155

2,400
2,080

2,400
2,100

-100
-1/700 17
-20
2,305
4,180

-3,700
-290
02/
3,840

Includes $700 million rescission of 1980 and prior year appropriations.
If reforms are enacted by Congress in time, an appropriaton of S2.4 billion will be requested.

Program Description
The Environmental Protection Agency spends about $4 billion annually for the construction of
municipal' wastewater treatment plants.
With current project eligibilities and Federal cost share, the total estimated Federal cost has grown to
$90 billion. The $90 billion in total Federal cost is in addition to the $35 billion already appropriated.
This is because under current law, projects that are designed to address problems of the future instead
of correcting those of today and projects which have little or no impact on water quality are still
eligible for Federal funding.

Proposed Change
The proposed budget action would:
•

Rescind the remaining unobligated balance of" $114 million appropriated under the Public
Works Employment Appropriations Act of 1977,

•

Rescind $586 million in unobligated 1980 appropriations, carried forward into 1981,

•

Rescind $1 billion in unobligated 1981 appropriations, and

•

Propose a zero appropriation in 1982, pending enactment of reforms that focus the Federal
funding on clearing up the backlog of significant water quality problems and place clear
limits on the magnitude and scope of the Federal program.

A request of $2.4 billion would be initiated when reforms are enacted. In subsequent years, an
annual level of $2.4 billion is expected to be sufficient to meet the reformed program needs. The
legislative reforms will eliminate from eligibility for Federal funding collection systems, and the
portion of plant capacity designed for future population. In addition, those projects that do not
significantly improve water quality will not be eligible for Federal funding.

Rationale
This proposal is an integral component of the Administration's overall effort to stretch out and
retarget public sector capital investment programs.
The reforms proposed will lower the total Federal program cost from $90 billion to about $23 billion
and would do so without adversely affecting the quality of our nation's waters. Federal funding must
be refocused and targeted toward projects that serve existing populations and which direcdy improve
water quality. Project elements serving future growth in community population or which do not
improve the quality of receiving waters should be financed by State and local governments, if at all.

297

The near-term funding level must be reduced as part of the President's Economic Reform Program.
No major impact on projects currently underway is envisioned from this reduction since $14 billion in
appropriated but unspent funds are still available to continue projects previously initiated.

Key Facts About the Program
•

Over 4,500 individual projects for the construction of municipal wastewater treatment plants
will have work completed from prior year appropriations, even after proposed budget
reductions take place.

•

About 2,300 construction projects have already been completed. About half of all funds
spent were on collection system or other pipe related projects. The other funds went to
construction of treatment facilities.

Funding History
(S in Billions)
Total Funds Appropriated

34.9

Total Funds Proposed for Rescission

. 1.7

Total Funds Obligated

29.4

Total Unobligated Funds

3.8

Total Unexpended Funds

14.3

298

National Aeronautics and Space Administration

299

National Aeronautics and Space Administration
Agency: National Aeronautics
and Space Administration

Functional
Code: 250

Budget Reform
Criterion: 6

Funding
1981
CARTER BUDGET:
Budget Authority
Outlays
REESTIMATES & ADJUSTMENTS:
Budget Authority
Outlays
PROGRAM CHANGES:
Budget Authority
Outlays
REAGAN BUDGET:
Budget Authority
Outlays

5,534
5,283

1982
6,722
6,360

(S in millions)
1984
1983

1985

1986

7,273
6,961

6,788
6,814

6.240
6,364

5,799
6,000

-46
-46

-120
-120

-142
-142

-200
-200

-15
-12

-604
-469

-739
-660

-813
-695

-523
-682

-239
-482

5,519
5,271

6,118
5,891

6.488
6,255

5,855
5,999

5,575
5,540

5,360
5,318

Program Description
Programs of NASA consist primarily of R&D activities in the area of space transportation, space
science, space and terrestrial applications, aeronautics R&D, and general agency-wide supporting
activities.
•

Space transportation programs provide for procurement and operation of a fleet of space
shuttle orbiters and other space and ground hardware to meet the launch needs of civil,
military, and foreign users.

•

Space science programs investigate the Earth's space environment, the Sun, the planets and
distant objects in the Universe — primarily through the use of unmanned satellites supported
by ground based research.

•

Space and terrestrial applications activities support R&D to apply space technology to
practical uses on Earth. Included are activities to improve understanding of Earth resources,
climate, weather and pollution; to develop agricultural forecasting techniques based on
satellite data; to extend the range of satellite communications; and to assess future prospects
of materials processing in space.

•

Aeronautics R&D supports fundamental research in the aeronautical disciplines (e.g.,
aerodynamics, propulsion) and selected component technology development and
demonstration efforts.

•

General agency-wide support activities include primarily satellite tracking and data acquisition
support, personnel costs and administrative activities; maintenance and upgrade of the
agency's physical plant, and R&D addressing fundamental space technology problems and
opportunities common to a broad spectrum of space programs.

The following table summarizes the Reagan budget adjustment:

Space Transportation
Space Science
Space and Terrestrial
Applications
Aeronautics
Other
Total NASA

(BUDGET AUTHORITY IN MILLIONS OF DOLLARS)
January
Amended
Budget
Change
Budget
1981 1982
1981 1982
1981 1982
2,627 3,273
+ 52 -168
2,679 3,105
562
727
-24 -173
538 584.
-

354
473
324
276
1.715 1.895
5,534 6,722

301

-22
-4
-17
-15

-100
-59
-104
-604

332 373
272 265
1,698 1.791
5,519 6,118

Proposed Change
The revised budget proposes to eliminate or defer all 1981 and 1982 new program initiatives in space
transportation, space science, space and terrestrial applications and aeronautics R&D, and makes
reductions to ongoing programs as follows:
•

For space transportation, the revised budget: delays readiness of the spacelab to be carried
as a shuttle payload; eliminates funding for the solar electric propulsion system for which no
applications have been approved; makes adjustments in operating funds associated primarily
with rescheduled shuttle flights for space science missions and other reductions in the early
operational flight rate; and, defers relatively lower priority shuttle-related hardware
procurements. In 1981, an additional $52 million in budget authority is allocated to the
shuttle program, within the total NASA appropriation. This increase will provide added
schedule confidence in shuttle development, test and production activities.

•

For space science, the revised budget: defers major efforts on several projects including the
Venus Orbiting Imaging Radar, the Gamma Ray Observatory, and spacelab experiments; and
reduces U.S. participation in the International Solar Polar Mission to be carried out
cooperatively with the Europeans.

•

For space and terrestrial applications, the revised budget: cancels several new projects
including the NOAA/Defense/NASA demonstration of a National Oceanic Satellite System,
a geological applications program related to mineral exploration, and the follow-on
operational demonstration of a joint international search and rescue satellite mission; delays
or reduces work on instruments for a future Upper Atmospheric Research Satellite,
agricultural applications of remote sensing data, and materials processing in space
experiments on the shuttle; terminates the separately identified program for remote sensing
technology transfer activities and phases down the technology utilization program.

•

For aeronautics R&D, the revised budget: eliminates funding in 1982 for a new numerical
aerodynamic simulator and a program to develop new materials for use in primary aircraft
structures; reduces generally ongoing aeronautics technology development and demonstration
efforts.

•

For general agency-wide activities, the revised budget proposes broad general reductions
including such activities as facility improvements; specific funding for NASA energy
technology work; the development of generic space technology, and reductions in
administrative expenses.

Rationale
•

For space transportation, the revised budget maintains progress in the space shuttle program
to achieve the operational readiness dates and capabilities needed for civil and critical
national security missions starting in July 1983.

•

For space science, deferral of some new and recently initiated flight projects and a
restructuring or reduction of some ongoing programs are necessary because of increased costs
for ongoing programs, the urgent need for fiscal restraint, and the high costs and
technological risks inherent in large new projects. The new or recently initiated projects
proposed for deferral have relatively small past investments, resulting in relatively small cost
penalties for delays. The revised budget: maintains on schedule the two highest priority
space science projects, the space telescope and the Galileo mission to Jupiter; maintains all
other planned major projects on a deferred or reduced basis; and includes Kinds to utilize
fully satellites launched in prior years.

•

For space and terrestrial applications, the sharp rate of growth proposed for this program in
the January 1982 Budget is inconsistent with the need for fiscal restraint. Several projects
that are less urgent need to be reduced or cancelled. However, the revised budget would
continue to maintain strong core programs in all major areas of activity, including research
on space remote sensing techniques related to managing Earth resources; research related to
understanding weather and climate; space communications R&D; and longer term research
related to materials processing in space.

•

For aeronautics R&D, the reductions are focused primarily on new projects having relatively
small accumulated past investments and on ongoing technology development and
demonstration activities which are more- appropriately the responsibility of the private sector.
The revised budget preserves the fundamental research activities having broad civil and
military applicability.

•

For agency-wide supporting activities, cuts are focused on deferrable projects (e.g., facility
construction and improvement) and activities not related to the primary mission of NASA
(e.g., energy technology R&D). The revised budget preserves a strong institutional base
capable of supporting the full range of future activities to maintain U.S. leadership in space
and aeronautics.

Key Facts About the Program
•

Although the proposed 1982 revised budget for NASA, $6,118 million in budget authority,
represents a decrease of $604 million (or 9%) from the January budget, it provides an
increase of $584 million (or 11%) over the funding level already appropriated for NASA in
1981.

•

The shuttle accounts for over 70% of the increase now proposed from 1981 to 1982.
Funding for shuttle and related programs are proposed to increase 18% above the level
appropriated in 1981.

•

Funding for NASA programs other than shutde will increase an average of about 4% in 1982
over the previously appropriated level. An increase of $41 million in 1982 is proposed for
the key nonshuttle programs of space science and space applications to permit the highest
priority activities to continue as planned.

303

Veterans Administration

305

Beneficiary Travel
Agency: Veterans
Administration

Functional
Code: 703

Budget Reform
Criterion: 1

Funding
CARTER BUDGET 17 :
Budget Authority
Outlays
REESTIMATES & ADJUSTMENTS:
Budget Authority
Outlays
PROGRAM CHANGES 27 :
Budget Authority
Outlays
REAGAN BUDGET:
Budget Authority
Outlays

($ in millions)
1984
1983

1981

1982

84
84

78
78

86
86

0
0

-8
-8
76
76

1985

1986

94
94

102
102

110
110

0
0

-5
-5

-7
-7

-8
-8

-10
-10

-11
-11

73
73

79
79

86
86

92
92

99
99

Funding relates only to beneficiary travel resources and includes the Carter proposal to reduce resources by $15 million in 1982-1986.
27

1982-1986 savings have been reestimated from the March Revisions.

Program Description
The VA currently provides reimbursement to veterans for actual or computed mileage costs of travel
between the veteran's home and the VA medical facility. The purpose of the reimbursement is to
ensure that eligible beneficiaries will be able to avail themselves of needed care.

Proposed Change
The Administration proposes, effective July 1, 1981, to establish a $5 deductible in travel
reimbursment for non-service-disabled veterans receiving medical care at VA facilities. This is
estimated to save $20 million in 1982. (The 1982 Carter Budget proposed a $15 million reduction in
beneficiary travel, effective October 1, 1981.)

Rationale
With the well-recognized need to restrain Government spending, beneficiary travel reimbursements
must be seen as a low priority in relation to the VA's health care mission. Additionally, while it is
reasonable to defray the cost of travel for service-disabled veterans, it is unreasonable to assume that
non-service-disabled veterans cannot pay part of their transportation to receive VA medical care. A
deductible of $5 should not pose an undue hardship on low-income veterans, or be a barrier to care.

Key Facts About the Program
•

The Administrator was given the authority (P.L. 96-151) to establish standards to determine
the validity of claimed inability to pay travel costs. However, the legislation had so many
limitations that it has produced minimal savings and is now requiring the establishment of a
deductible for non-service-disabled veterans.

•

It is estimated that nearly 50 percent of travel reimbursements are for less than $5.

307

Construction Projects
Agency: Veterans
Administration

Functional
Code: 703

Budget Reform
Criterion: 5

Funding
CARTER BUDGET:
Budget Authority
Outlays
REESTIMATES & ADJUSTMENTS:
Budget Authority
Outlays
PROGRAM CHANGES:
Budget Authority
Outlays
REAGAN BUDGET:
Budget Authority
Outlays

($ in millions)
1984
1983

1981

1982

424
277

501
443

794
498

1,515
635

1.385
1,190

0
0

-162
-28

-71
-91

52
-74

11
-55

0
-3

0
36

262
249

430
352

846
424

1,526
580

1,385
1,187

1,385
1,226

1985

1986

Program Description
This account funds construction projects, primarily for medical facilities, costing $2 million or more.

Proposed Change
The Camden, N.J. and Baltimore, Md. hospital projects are proposed for cancellation, with rescission
of appropriated funds, and nine other projects are proposed for deferral: Denver, Colo, clinical
addition, 1 year; New Orleans, La. clinical addition, 2 years; Chillicothe, Ohio phased replacement
facility, 2 years; Washington, D.C. nursing home care addition and parking facility, 2 years; Long
Beach, Cal. research and education addition, 2 years; Palo Alto, Cal. surgical addition, 2 years; East
Orange, N.J. facility renovation, 2 years; St. Albans (Brooklyn), N.Y. laundry addition, 2 years; and
Gainesville, Fla. clinical addition, 2 years.

Rationale
The two hospital projects proposed for rescission are in overbedded areas. The other projects are
deferred to stretch out Federal capital expenditures and allow the Administration an opportunity to
review the distribution of VA medical facilities.

Key Facts About the Program
•

Botn rescinded hospitals have three other VA hospitals within 30 miles.

•

The deferred projects can be delayed with little, if any, risk to patient and employee safety.

308

Outpatient Dental Treatment
Agency: Veterans
Administration

Functional
Code: 703

Budget Reform
Criterion: 1

Funding
CARTER BUDGET:
Budget Authority
Outlays
REESTIMATES & ADJUSTMENTS:
Budget Authority
Outlays
PROGRAM CHANGES:
Budget Authority
Outlays
REAGAN BUDGET:
Budget Authority
Outlays

($ in millions)
1984
1983

1981

1982

95
95

45
45

54
54

63
63

70
70

77
77

0
0

-8

(-32) 17

(-30) 1 7

(-28) 1 7

(-27) 1 7

("26):

-8

(-32)

(-26)

87
87

45
45

(-30) '
54
54

(-28)
63
63

1985

(-27)
70
70

1986

77
77

1/ Legislative savings proposed in the Carter and Reagan budgets.

Program Description
The VA medical program includes outpatient dental sendees and treatment for veterans under various
types of eligibility. Veterans eligible for class II benefits receive dental services and treatment for
conditions that existed during active duty if application is made within one year of discharge or
release from military service. These are generally minor dental conditions which are not a result of
sendee trauma or related to prisoner-of-war status and which should have been treated while in
service.

Proposed Change
The Administration proposes effective July 1, 1981, to eliminate class II dental benefits and require
that DOD take the responsibility for treatment prior to discharge. (The 1982 Carter Budget proposed
elimination of this benefit effective October 1,1981.)

Rationale
Since active duty military personnel are entitled to complete medical and dental care, it should be the
responsibility of the dental services of the Department of Defense to treat conditions that exist during
service. Provision of these services affects VA's ability to channel scarce resources and attention on
veterans with more serious dental conditions resulting from direct service trauma or prisoner-of-war
status and on veterans who have 100 percent service-related disabilities.

Key Facts About the Program
•

For 1982 an estimated 63,000 veterans will be affected at an average VA staff cost of $450
and a fee basis cost of $585.

•

Those receiving such outpatient dental treatment are generally veterans whose dental
conditions existed during or before their active military duty but who either did not seek or
receive any treatment during service. These are generally minor dental conditions.

•

Since the existing authority permits veterans- to delay treatment for up to 12 months,
unnecessary deterioration of an otherwise routine condition or development of new dental
problems often results which add greatly to the cost of treatment.

•

There are no controls in the case of veterans whose service was of relatively brief duration. A
survey conducted by VA found that about 40 percent of all volunteers entering military
senice do not complete a tour of duty with about half of these leaving during the first six
months. For the group with less than 6 months service, it is almost certain that cavities and
periodontal disease noted at discharge preexisted military sendee.

309

GI Bill: No Extension
Agency: Veterans
Administration

Functional
Code: 702

Budget Reform
Criterion: 1

Funding
1981
CARTER BUDGET:
Budget Authority
Outlays
REESTIMATES & ADJUSTMENTS:
Budget Authority
Outlays
PROGRAM CHANGES:
Budget Authority
Outlays
REAGAN BUDGET:
Budget Authority
Outlays

1982

f$ in millions)
1984
1983

1985

1986

2,040
2,071

1,689
1,699

1,359
1,369

1,051
1,061

851
861

668
668

0
0

-63
-63

-67
-67

-16
-16

-14
-14

-13
-13

2,040
2,071

1.626
1,636

1,292
1,302

1,035
1,045

837
847

655
655

Program Description
The GI bill provides up to four school years worth of benefits to veterans for education and training
to aid the transition to civilian life. Veterans have ten years following discharge to use this
entitlement.

Proposed Change
Withdraw the Carter proposal to extend the eligibility period for two additional years for on-the-job
and apprenticeship programs for certain disadvantaged veterans.

Rationale
Despite H.R. 3272 and S.870, the 96th Congress introduced for the Carter Administration, Congress
has not enacted this proposal. In this period of fiscal restraint, such a low-priority benefit increase is
unnecessary.

Key Facts About the Program
•

The only programs for which veterans are eligible are on-the-job training and high school or
vocational — technical programs.

•

Carter budget projected use by 36,000 veterans in each of the first two years.

•

Most of these veterans are now in their middle 30's.

310

G.I. Bill: Flight and Correspondence Training
Agency: Veterans
Administration

Functional
Code: 702

Budget Reform
Criterion:
8

Funding
1981
CARTER BUDGET:
Budget Authority
Outlays
REESTIMATES & ADJUSTMENTS:
Budget Authority
Outlays
PROGRAM CHANGES:
Budget Authority
Outlays
REAGAN BUDGET:
Budget Authority
Outlays
l/

(S in millions)
1984
1983

1982

1985

1986

2.040
2,071

1,689
1,699

1,359
1,369

1,051
1,061

851
861

668
668

0
0

-14
-14
2.026
2,057

(-32) 1 7

(-28) 17

(-24) 1 7

HI)17

(-24) 1 7

(-32)
1,689
1,699

(-28)
1.359
1,269

1,051
1,061

Ml)
851
861

(-3) :
(-3)"
668
668

Legislative savings proposed in the Carter and Reagan budgets.

Program Description
The GI bill provides benefits to eligible veterans for education and training to aid the transition to
civilian life.

Proposed Change
The Carter budget included a legislative proposal to terminate benefits to veterans for flight and
correspondence training effective October 1, 1981. The March revisions would move the effective date
to July 1, 1981.

Rationale
This proposal terminates use of GI bill entitlements for activities which are primarily avocational in
nature and which seldom contribute to the employability of the veteran graduate. Legislation passed
in 1980 (P.L. 96-466), which requires that the veteran share the cost of instruction, appears to have
had little effect on demand for use of the GI bill for this purpose. 1981 savings are assumed on the
basis of this bill's inclusion in the reconciliation package.

Key Facts About the Program
•

Rates of:
Completion
Related-field placement of completers

•

If these programs remain in law, it is estimated that 45,000 veterans would participate.

311

Flight
52%
43%

Correspondence
41%
less than 50%

Insurance Loans
Agency: Veterans
Administration

Functional
Code: 701

Budget Reform
Criterion: 1

Funding
1981
CARTER BUDGET: 17
Budget Authority
Outlays
REESTEVIATES & ADJUSTMENTS:
Budget Authority
Outlays
PROGRAM CHANGES:
Budget Authority
Outlays
REAGAN BUDGET:
Budget Authority
Outlays
17

1982

($ in millions)
1984
1983

1985

1986

1,175
1,047

1,202
1,071

1,212
1,090

1,214
1,108

1,221
1,163

1,196
1,188

0
0

0
-91

0
-96

0
-65

0
-41

0
-13

0
0

1,175
956

1,202
975

1,212
1,025

1,214
1,067

1.221
1,150

1,196
1,888

Total outlays of affected insurance accounts.

Program Description
The Veterans Administration provides approximately $30 billion in insurance to over four million
veterans. Veterans who make policy loans against those policies with cash surrender value, are
currently being charged interest at the rate of 5 percent per annum. During periods of high interest
rates, many veterans borrow against their insurance policies. This has had the effect of encouraging
veterans to borrow, diminishing the future security of veterans' families ii> the event of the untimely
death of the veteran since the value of the insurance policy is reduced.

Proposed Change
The revised budget proposes to set policy loan interest rates at a level 2 percent below the market
interest rate. This will reduce interest subsidies, discouraging veterans from unnecessary borrowing,
while still allowing loans to veterans in need. This will produce major reductions in policy loans
during this period of high interest rates, but will have a diminishing effect as interest rates abate.

Rationale
The obiernve of this proposal is to revise entitlements to eliminate an unintended benefit to veterans.
At -- ome that regulations were promulgated setting interest rates on policy loans at 5 percent,
r iKet rates were only marginally higher. As market interest rates have increased, no changes have
been made in loan interest rates, resulting in an unintended benefit to veterans borrowing on their
insurance policies. The proposed changes will restore policy loan subsidies to the levels that existed at
the time the 5 percent rates were established.

Key Facts About the Program
VA operates six insurance programs for veterans and administers one program for active-duty military
personnel.

•

4.6 million veterans are insured for a total of $31.2 billion.

•

3.0 million veterans holding permanent policies are eligible for policy loans. Over 80 percent
(2.5 million) of these are in the National Service Life Insurance (NSLI) program for World
War II veterans. NSLI policy holders average 58.3 years of age.

•

In 1979, policy loans had a dollar value of $172 million; in 1981, loans are estimated at $301
million, a 75 percent increase.

312

•

In 1979, repayments were 75 percent of loans made; in 1981, repayments are estimated to be
50 percent of loans made.

•

In 1979, the 5 percent interest rate charged averaged approximately 4 percent below market
rates (US Treasury Security Yields, Constant Maturities, 10 years); in 1981, the 5 percent
interest rate will average 8 percent below market rates.

•

In 1982, insurance loans will be reduced from $298 million at 5 percent to $202 million at
the recommended 2 percent differential rate.

313

Physicians' and Dentists' Bonuses
Agency: Veterans
Administration

Functional
Code: 703

Budget Reform
Criterion: 8

Funding
CARTER BUDGET:
Budget Authority
Outlays
REESTEV1ATES & ADJUSTMENTS:
Budget Authority
Outlays
PROGRAM CHANGES:
Budget Authority
Outlays
REAGAN BUDGET:
Budget Authority
Outlays

($ in millions)
1984
1983

1981

1982

797
797

838
838

897
897

959
959

1,027
1,027

1,098
1,098

0
0

-10
-10

-40
-40

787
787

798
798

857
857

919
919

987
987

1,058
1,058

1985

1986

Program Description
VA's Department of Medicine and Surgery employs 12,920 physicians and dentists to provide medical
and dental care to service-disabled and, on a space-available basis, to other veterans unable to defray
the cost of medical care at non-VA medical facilities. The Carter budget for 1982 allows $135 million
for physicians' bonuses up to $27,500 per annum over and above regular salaries (at the $50,112.50
Federal ceiling for 85 percent of VA physicians).

Proposed Change
The revised budget proposes to reduce total funds available for physicians' and dentists' bonuses in
order to assure that these bonuses are provided only in cases and to the extent necessary to recruit
and retain necessary skills. The reductions will be accomplished by restricting funds that may be paid
in physicians' and dentists' bonuses to not more than 12 percent of the total amount provided in
appropriations for physicians' and dentists' remuneration.

Rationale
The objective of this proposal is to reduce unnecessary costs of personnel to the Federal Government.
Prior to enactment of P.L. 96-330 in August 1980, VA physicians could receive annual bonuses of up
to $12,000 in addition to their regular salary. The proposed change will eliminate the payment of
bonuses in excessive amounts to VA physicians, while giving the Administrator of VA authority to
raise bonuses to $27,500 per year in those instances in which this is found necessary to attract and
retain individuals with scarce specialites or to attract physicians into difficult-to-recruit areas. For
others, bonuses will be lower.

Key Facts About the Program
•

In 1982, VA will employ 11,866 (FTE) physicians (just over half, full-time) and 1,054
dentists.

•

P.L. 96-330 increased VA physicians' and dentists' bonuses from $12,000 to a high of
$27,500 per annum. (Dentists' bonuses increased from $6,750 to $12,000.).

•

Total 1982 costs of physicians' and dentists' bonuses are estimated to be $135 million, $40
million higher than estimates used in the Congress at the time of its passage.

•

This bonus increase gives pay raises of 27 to 38 percent for VA physicians.

•

It made VA physicians the highest paid Federal physicians. At mid-career:

— VA physicians could earn 25 percent ($77,600 vs. $62,100) more than the maximum
authorized annual salary of Armed Force's physicians.
— VA physicians could earn 38 percent more ($77,600 vs. $56,400) than general schedule
physicians.
314

•

VA physicians' "base" salaries are significantly higher than those of military physicians.
— Average VA base salary is $48,700.
— Average military base salary (includes military allowances) is $29,200.
— 85 percent of VA physicians are at mid-career or higher levels.
— 58 percent of military physicians are at mid-career or higher levels.

•

VA physician vacancies were low, ranging between 1.4 and 3.9 percent of their average of
10,700 authorized full-time and part-time positions during the year prior to enactment of
P.L. 96-330.

315

Medical Care: Miscellaneous Reductions
Agency: Veterans
Administration

Functional
Code: 703

Budget Reform
Criterion: 6

Funding
1982

1981
CARTER BUDGET:
Budget Authority
Outlays
REESTEV1ATES & ADJUSTMENTS:
Budget Authority
Outlays
PROGRAM CHANGES:
Budget Authority
Outlays
REAGAN BUDGET:
Budget Authority
Outlays

(S in millions)
1984
1983

1985

1986

6,203
6,152

7,225
7,203

7,769
7,748

8,213
8,208

8,728
8,705

9,257
9,233

0
0

11
11

194
194

412
412

675
-675

934
934

1.182
1,182

6,192
6,141

7,031
7,009

7,357
7,336

7,538
7,533

7,794
7,794

8,075
8,051

Program Description
The VA provides hospital and medical care to veterans in its nationwide medical system and in
non-VA facilites on a reimbursement basis. This paper discusses miscellaneous reductions in the three
major VA medical accounts.

Proposed Change
Reductions associated directly and indirectly with medical staffing reductions and miscellaneous
changes to the medical programs are proposed. Associated with staffing changes, are reductions in new
initiatives, facility activations and increases for specialized medical programs. The miscellaneous
changes reflect revised 1982 inflation allowances for non-personnel funds, no allowance for "increased
usage" or for out-year inflation, Government-wide reductions in travel and consulting services,
reduced increases for equipment and no increase in medical consulting and attending personnel rates.

Rationale
The objective of this change is to impose fiscal restraint on the veterans medical care programs. This
restraint has been imposed primarily through the reduction of overhead costs and restraining growth
in the medical administration, research, and medical care programs.

Key Facts About the Program
1982 medical care non-personnel reductions ($194 million):
•

Non-personnel reductions in new initiatives, facility activations and
increases planned for specialized medical programs

$54

•

Revised inflation allowances (9.8% to 9.1%)

•

No allowance for "increased usage"

•

Reduction in capital investment

•

Reduction in travel and consulting services

•

Elimination of planned rate increases for consulting and attending personnel

316

4
10

Medical Staffing
Functional
Code: 703

Agency: Veterans
Administration

Budget Reform
Criterion: 8

Funding
1981
CARTER BUDGET:
Budget Authority
Outlays
REESTIMATES & ADJUSTMENTS:
Budget Authority
Outlays
PROGRAM CHANGES:
Budget Authority
Outlays
REAGAN BUDGET:
Budget Authority
Outlays

1982

($ in millions)
1984
1983

1985

1986

6,203
6,152

7,225
7,203

7,769
7,748

8,213
8,208

8,728
8,705

9,257
9,233

0
0

32
32

132
132

236
236

307
307

386
386

477
477

6,171
6120

7,093
7,071

7,533
7,512

7,906
7,901

8,342
8,319

8,780
8,756

Program Description
To provide hospital and medical care to veterans in its nationwide medical system, average
employment for VA was estimated in the Carter 1982 Budget at 191,165 and 191,816 for FY 1981 and
1982, respectively. This staffing level would provide for the administration of the medical system (928
FTE); research into health problems (4,601 FTE), and the treatment of 1.4 million inpatients and 18.4
million outpatient visits (186,287 FTE).

Proposed Change
Reduce the non-direct care employment of the three medical accounts (82,594 of 191,816 FTE)
consistent with Government-wide employment reductions and eliminate 1983-1986 growth planned
for facility activations and new initiatives. This change reduces VA medical employment by 1,368
FTE and 5,551 FTE in 1981 and 1982, respectively.

Rationale
In order to bring about the reduction in Federal employment that President Reagan has promised the
American people, it will be necessary to make some reductions in the size of VA's medical care
programs. (The Department of Medicine and Surgery (DM&S) employs over 90 percent of VA's total
personnel.) The Administration proposes to return DM&S to approximately the staffing level that it
had in 1979. If VA staffing reductions are made in areas which have the lowest impact on patient
care, the cuts can be achieved with minimal impact on the medical treatment of veterans.

Key Facts About the Program
•

The following compares the average employment for the 3 medical accounts (Medical care,
Medical and prosthetic research, and Medical administration and miscellaneous operating
expenses (MAMOE).

Medical Care
Research
MAMOE
Total
•

1980
Actual

Carter

1981
Reagan

Carter

1982
Reagan

185,054
4,360
831
190,245

185,869
4,443
853
191,165

184,589
4,369
839
189,797

186,287
4,601
928
191,816

181,106
4,293
866
186,265

116,775 direct care positions (107,795 FTE) in the Medical care account were exempted from
the Government-wide employment reduction. No exemptions were allowed in the research
and MAMOE accounts.

317

Impact on selected medical care workload indicators (VA facilities only):
1980
Actual
Inpat. treatment
Daily census
Outpat. visits
Length of stay
Staffing ratios

1,275,446
83,936
15,751,690
22.6
2.11

1981

1982
Reagan

Carter

1,265,950
81,042
16,012,000
22.4
2.19

1,265,950
81,042
16,054,000
22.4
2.21

Carter

Reagan

1,267,054
80,418
16,129,000
22.2
2.25

1,267,007
80,387
14,429,000
22.2
2.21

1982 Medical and prosthetic research reductions (308 FTE) will be primarily achieved
through reducing the increases for new initiatives (254 FTE, $5.8 million).
•

1982 Medical administration and miscellaneous operating-expenses (MAMOE) reductions (62
FTE) will be achieved through reductions in planned staff augmentation (34 FTE, $1.7
million) and in Health Care Information System and other ADP support increases (28 FTE,
$1.8 million).

•

Out-year effect on medical care employment. The Carter budget provided for substantial
growth in medical care employment primarily for facility activations, which include
replacement hospitals and additional nursing home beds (30% increase by 1986). The
1983-1986 revised level reflects the Government-wide employment reduction of non-direct
care personnel and elimination of any increase in employment over 1982 level. Employment
for facility activations will now come from within existing levels.
Carter Budget
Facility activations
Reductions
Reagan level

•

1983

1984

1985

12M

188,437
(2,818)
-8.880
179,557

190,647
(5,264)
-11.861
178,786

193,126
(7,376)
-15.111
178,015

196,181
(10,600)
-18:937
177,244

The following table identifies the average employment since 1973.
AVERAGE EMPLOYMENT
1275
1222
1M
1979

1973

1980

Major Medical Programs:
152,267

163,813

176,142

184,258

181,088

185,054

MAMOE

772

748

788

777

781

831

Research

3,807

4,232

4,333

4,367

4,416

4,360

156,846

168,793

181,263

189,402

186,285

190,245

Medical care

Total Medical programs

318

Veterans Readjustment Counseling Centers
Agency: Veterans
Administration

Functional
Code: 703

Budget Reform
Criterion: 8

Funding
CARTER BUDGET 17 :
Budget Authority
Outlays
REESTIMATES & ADJUSTMENTS:
Budget Authority
Outlays
PROGRAM CHANGES:
Budget Authority
Outlays
REAGAN BUDGET:
Budget Authority
Outlays
17

($ in millions)
1984
1983

1985

1986

31
31

(33)
(33)

(35)
(35)

(37)
(37)

(38)
(38)

0
0

-4
-4

-31
- 31

(-33)
(-33)

(-35)
(-35)

(-37)
(-37)

(-38)
(-38)

26
26

0
0

1981

1982

30
30

The Carter budget proposed a one-year extension of the program.

Program Description
P.L. 96-22 authorized the Administrator, within the limits of VA facilities, to furnish counseling to
Vietnam veterans to assist them in readjusting to civilian life. Eligibility for counseling was
terminated at two years after discharge from service or two years after the effective date of the
legislation (10/79).
In 1979, Administrator Cleland made a programmatic decision to use this authority to seek out
Vietnam veterans who refused to seek assistance from traditional VA sources. To do this he
established 91 "storefront" outreach centers, mostly in inner city areas. These operations were very
loosely managed (from VA Central Office), and typically consisted of a team leader, about half of the
time a social worker or psychologist, two staff members (Vietnam veterans who have been given short
training courses in counseling), and a secretary.
The principal objective of this operation was to seek out disaffected Vietnam veterans, counsel them
on veterans' benefits and services, and, where appropriate, persuade them to seek professional
counseling from psychologists and psychiatrists at neighboring VA hospitals. The program was
instituted on a temporary (2 year) basis because it was believed that the major part of the target
population would have been contacted by the end of that time.

Proposed Change
The Reagan budget revisions propose not to seek extension of the authority for readjustment
counseling centers beyond its expiration date of September 30, 1981. The Carter budget had
proposed a one-year extension of the program.

Rationale
The "storefront" centers have contacted the majority of veterans who might be helped by this
approach. A nationwide system of outreach centers is not a cost-effective way of reaching the
remaining veterans in need of help.

Key Facts About the Program
•

The initial congressional authorization provided for a two-year period of entitlement Since
most of the veterans affected have been out of service since the early 1970's, their 2-year
entitlement expires by the end of FY 1981.

•

The outreach centers duplicate services offered in VA medical centers and Regional Offices.
Most of the sendees provided by the centers have been and should continue to be provided
by traditional VA facilities and veterans' organizations.

319

The outreach centers are not prepared to provide professional counseling services, and must
rely on supporting VA hospitals to provide this care. Although VA hospitals are directed to
give priority care to cases referred from outreach centers, neither outreach centers nor
hospitals have maintained records on referred veterans and officials contacted believe it to be
low.
VA facilities have made a concerted effort in recent years to be aware of the needs and
problems of Vietnam veterans. Although service organizations have been described as being
more oriented for World War II and Korean veterans, they provide valuable functions which
should be used for Vietnam veterans.
—

Distribution of information and guidance on veteran entitlements is provided by all
veterans' organizations through highly knowledgeable personnel at locations in almost
every city.

—

Social contact, giving veterans an opportunity to discuss their war experiences, is a
major function of all veterans' organizations.

Efforts to collect firm data on the productivity of these centers have been minimally
successful, with some centers refusing and others providing highly questionable data.
—

Over the first year and a half of this program, available data show that 47,000 veterans
have received services from outreach centers. Data show that these 47,000 veterans
generated 128,000 patient visits, and 24,000 family visits. That averages slightly more
than 500 cases and 1,670 visits a year per center or about 6 visits a day for the 4
employees at each center, a very low level of activity. About 60 percent of those
provided services actually served in Vietnam.

—

No data are available on the disposition of these cases, i.e., whether referred to
hospitals or local benefits offices.

320

Foreign Assistance

321

Foreign Development Assistance
Agency: Foreign
Assistance

(individual agencies
programs follows)

Functional
Code: 151,153 and 154

Funding
1981
CARTER BUDGET:
Budget Authority
Outlays
REESTLMATES & ADJUSTMENTS:
Budget Authority
Outlays
PROGRAM CHANGES:
Budget Authority
Outlays
REAGAN BUDGET:
Budget Authority
Outlays

1982

Budget Reform
Criterion: 6

($ in millions)
1984
1983

1985

1986

5,449
4,951

7,277
5,212

6,601
5,700

7,717
6,394

8,228
6,947

8,688
7,470

-7
-120

-15
-93

-15
5

-15
16

-15
-6

-15
-12

-624
-92

-1.852
-425

-203
-612

-2,512
-1,161

-2,977
-1,489

-3,187
-1,940

4,818
4,739

5,410
4,694

6,383
5,093

5,190
5,249

5,236
5,452

5,486
5,518

Program Description
Reductions in foreign development assistance affect six major programs.
•

Contributions to support development lending by Multilateral Development Banks,

•

Assessed contributions to a range of U.N. and other international organizations, as well as
voluntary contributions to U.N. and other international development programs.

•

The development loan and grant activities of the Agency for International Development
(AID).

•

Food aid under the Public Law 480 program.

•

The provision of volunteers to promote development and mutual understanding through the
Peace Corps.

•

U.S. support for the Common Fund, which will facilitate financing for international
commodity agreements.

In addition, reductions have been taken in the funds of the Inter-American Foundation, which makes
grants to indigenous private Latin American groups, and no funds have been provided for die African
Development Foundation, which was intended to play a similar role in Africa.

Proposed Change
The 1982 Reagan budget would reduce these programs by $1,867 million including reestimates, a 26
percent cutback. By 1986 the reduction from the Carter budget would be $3.2 billion in budget
authority, or 37 percent. Outlay reductions will be somewhat less, particularly in the near-term,
because budget authority for these programs spends out slowly and because some of the 1982
reductions involve the deferral of spending to 1983 and beyond. The specific reductions and the
reasons for them are presented in the papers that follow.

Rationale
The Carter budget proposed large increases in nearly 'all of the major development aid programs.
This was not only to finance past commitments made to multilateral institutions but to finance
anticipated future commitments in this area and to expand bilateral programs rapidly as well. The
Reagan budget assumes that development aid activities must achieve U.S. foreign policy objectives in
a manner consistent with the expenditure constraints of the President's economic recovery program.
Future development aid spending levels must also reflect the Administration's foreign policy priorities,
which give preference to security assistance programs to counter Soviet adventurism and to bilateral
programs which can reach intended beneficiaries more directly than multilateral programs. As a
result, in connection with the proposed reductions from the Carter budget the Administration will:

323

•

Undertake a major reassessment of the importance of the multilateral development banks to
the United States and the effectiveness and benefits of future contributions to these
organizations.

•

Undertake a similar study of contributions to international organizations.

•

Define new approaches to bilateral development aid, particularly placing greater reliance on
private sector participation, which will enable the Agency for International Development to
achieve its objectives at lower costs.

•

Reexamine food aid credit sales as foreign assistance rather than as a surplus disposal device
to determine whether continued large funding is necessary.

The Reagan budget assures that all past international commitments will be met, although payments
will be stretched out consistent with international agreements. Major humanitarian programs for
refugees, victims of disasters and the malnurished are to be continued close to the levels of recent
years.

324

Multilateral Development Banks
Agency: Department of the Treasury
International Development
Cooperation Agency

Functional
Code: 151

1981
CARTER BUDGET:
Budget Authority
Outlays
REESTIMATES & ADJUSTMENTS:
Budget Authority
Outlays
PROGRAM CHANGES:
Budget Authority
Outlays
REAGAN BUDGET:
Budget Authority
Outlays

1982

1,584
1,013

2,499
1.259

-82

-55

-540
-9
1.044
923

Budget Reform
Criterion: 6
(S in millions)
1984
1983

1985

1986

1,600
1,374

2,142
1,485

2.142
1,528

2,141
1,628

-976
-69

858
-95

-868
-106

-883
-156

-882
-305

1,523
1,135

2,458
1,279

1,274
1,379

1,259
1,372

1,259
1,323

Program Description
The multilateral development banks provide investment capital and technical assistance to developing
nations. They have become the major source of development lending to the Third World.
Periodically, their resources must be replenished, because repayments on previous loans are
insufficient to meet the demand for new lending. The total amount of the replenishments and
industrialized donor country, shares are determined in international negotiations. Donor contributions
are paid in installments over periods of several years. With one exception, the amounts proposed in
the Carter budget for these institutions have been previously and formally agreed to by the United
States in these negotiations. The Carter budget also contained funds to make up "arrearages" to the
banks caused by past congressional failure to appropriate funds covering the full amount pledged to
the institutions by the United States.
Each major institution has both concessional and non-concessional programs as follows:
Non-concessional lending

Concessional lending

International Bank for Reconstruction and
Development (World Bank)

International Development
Association (IDA—a component)
of the World Bank)

Regional Banks
Inter-American Development
Bank (IDB) Ordinary Capital

IDB Fund for Special
Operations

Asian Development Bank (ADB)

Asian Development Fund

African Development Bank (AFDB)

African Development Fund

Other Institutions

International Fund for
Agricultural Development
(IFAD, which makes loans
primarily for aid small farmers)

Non-concessional lending is financed only fractionally by funds paid into the institutions. This
lending comes mainly from the banks' borrowings on world capital markets backed by
donor-government guarantees of repayment to the banks' bondholders.

325

Proposed Changes
The Reagan budget proposals would:
•

Reduce the planned contribution to the 1982-84 replenishment of IFAD funds (not
previously agreed to) from $255 million to $180 million.

•

Reduce the U.S. contribution in the first two years of the 1981-1983 IDA Sixth
Replenishment, cutting the Carter budget request in half in 1981 and by one-fifth in 1982,
while increasing the 1983 contribution to offset the earlier cuts thereby maintaining the
current $3.24 billion U.S. commitment for the three year period.

•

Stretch out payments to other multilateral development banks.
—

Most significantly, by providing the previously pledged $658 million U.S. paid-in
subscription to the World Bank's general capital increase over six years, 1982-1987,
rather than all in 1982 as proposed by the Carter budget

—

Stretching out the payment of arrearages to the regional development banks over periods
of several years.

The table on the following page shows the proposed arrangement for stretching out
payments.

Rationale
The lending levels of these institutions have grown much more rapidly than bilateral U.S. assistance
in the recent past. Their programs should be reassessed by the United States to determine whether
large scale future spending by them is consistent with the effective achievement of U.S. foreign policy
objectives. This assessment must take into account the very tight future budget constraints and the
direct role bilateral programs can play in achieving goals abroad. While ideally this reassessment
should affect U.S. contributions starting now, the United States cannot revoke previous agreements to
provide funds without seriously undermining a system of international rules for cooperation from
which it benefits overall. The stretch-outs and deferred payments proposed are fully consistent with
internationally negotiated agreements.

Key Facts About the Program
•

Lending by the World Bank and International Development Association rose from $2.3
billion in 1970 to $11.5 billion in 1980, a five-fold increase.

•

There has been concern that the banks cannot handle the increasing volume of their lending
programs effectively. In the Asian and Inter-American Banks' non-concessional funds, the
pipeline of undisbursed loan funds has risen from $950 million to $3.7 billion between 1971
and 1979.

•

The World Bank and the regional banks, by the terms of their charters, have made loans in
recent years to Vietnam, Ethiopia and Afghanistan, countries hostile to the United States.

•

The Administration will study the costs and benefits of U.S. participation in the banks prior
to entering into new commitments.

326

Proposed Changes in 1981-1982 MDB Funding Requests
(BA in $ millions)

Institution
IF AD
IDA (VI)
IBRD (GCI)

1981
Carter
Reagan
Carter
Reagan
Carter
Reagan

—

1,080
540
—

1982
85
45
1,080
850
658
110

1983
85
60

1984
85
75

1,080
1,850
—

1985

- -

1986

—

110

52
(52)

(--)

(—)

(--)

(—)
(—)

57
(52)
( 5)

(—)

(--)

(—)

59
(52)
(7)
53
(52)
( 2)

(--)
(—)

(--)
(--)

(—)

Carter
(Sched)
(Arrear)
Reagan
(Sched)
(Arrear)

200
(175)
( 25)
200
(175)
( 25)

300
(175)
(125)
191
(175)
( 16)

175
(175)

(--)

(—)

(—)
(--)

(—)

206
(175)
( 31)

39
(--)
(39)

ADB (Arrearages)
Carter
Fund
(Sched)
(Arrear)
Reagan
(Sched)
(Arrear)

115
(111)
( 4)
115
(111)
( 4)

168
(111)
( 56)
125
(111)
(14)

111
(111)
(--)

IDB (Arrearages)
Carter
Capital
(Sched)
(Arrear)
Reagan
(Sched)
(Arrear)
FSO

—

52
(52)
(--)

52
(52)

125
(111)
(14)

- -

(—)

- -

(39)

(—)
(—)

(--)

__
(--)

(—)

(--)

(—)

(14)

(4)

(—)

(—)
-

International Organizations
(assessed and voluntary)
Agency: Department of
State

Functional
Code: 151,153

Funding
CARTER BUDGET:
Budget Authority
Outlays
REESTEVIATES & ADJUSTMENTS:
Budget Authority
Outlays
REAGAN BUDGET:
Budget Authority
Outlays

Budget Reform
Criterion: 6
(% in millions)
1984
1983

1981

1982

722
745

902
853

886
871

957
936

1,027
1,005

1,099
1,076

193
-180

-179
-174

-237
-228

-254
-85

-58
-54

709
673

707
697

720
708

774
920

1,040
1,021

722
745

1985

1986

Program Description
Assessed international organization contributions represent U.S. obligations under treaties to provide a
fixed share of the expenses of the United Nations and other multilateral bodies.
Voluntary
contributions are primarily to UN development programs and special multilateral funds.

Proposed Changes
•

Reductions in budget requests for assessed contributions for 1982-1986 will be accomplished
by slipping the quarterly payments schedule to 15 major organizations progressively later so
that by 1985 all the funds will be sought one fiscal year after the Carter Budget proposed
them. This will save $160 million in 1982 budget authority.

•

Voluntary contributions will be cut back each year from planned levels. The 1982 saving will
be $33 million in budget authority.

Rationale
As with the multilateral development banks, the United States must reassess the effectiveness of these
international organizations, as compared with bilateral programs, in meeting U.S. foreign policy
objectives and their efficiency as aid-giving institutions. The deferral of assessed payments provides
time for a thorough review of the costs and benefits of U.S. membership in these organizations while
temporarily reducing the impact of these contributions on the U.S. budget Reductions in voluntary
contributions reflect concerns that the organizations' programming criteria may not target funds on the
most promising activities to promote development in ways that maximize private sector participation.

Key Facts About the Program
•

Development aid in some U.N. programs is made available to every Third World country
with the recipient governments frequently determining how the funds will be spent

•

In the recent past the regular assessed budgets of several U.N. organizations have increased
substantially.

•

By the terms of their charters these organizations must provide grant assistance to all eligible
member countries, including Cuba and Vietnam.

•

The State Department will be reviewing contributions to international organizations to
determine how efficiently the institutions operate and how well they serve the interests of
developing nations, the United States and other major donors.

328

Agency for International Development
Agency: International Development
Cooperation Agency

Funding
1981
CARTER BUDGET:
Budget Authority
Outlays
REESTTMATES & ADJUSTMENTS:
Budget Authority
Outlays
PROGRAM CHANGES:
Budget Authority
Outlays
REAGAN BUDGET:
Budget Authority
Outlays

Budget Reform
Criterion: 6

Functional
Code: 151
1982

($ in millions)
1984
1983

1985

1986

1,711
1,610

2.386
1.674

2,679
2,026

3,010
2,371

3,342
2,703

3,702
3,027

-7
-38

-15
-33

-15
+5

-15
+ 1

-15
-6

-15
-12

-3
-3

-471
-38

-764
-205

-1,095
-504

-1,427
-819

-1,787
-1,126

1,701
1,569

1,900
1,603

1,900
1,826

1,900
1,868

1,900
1,878

1,900
1,889

Program Description
AID provides bilateral assistance through grants and concessional loans to more than 60 countries in
Africa, Asia and Latin America. AID also finances development research programs implemented by
U.S. universities and other institutions.

Proposed Changes
The 1982 Reagan proposal would reduce the 1982 program by $486 million from the Carter budget to
a level of $1.9 billion.

Rationale
The Carter proposal included a "Leadership Package" to encourage other donors to increase their aid
programs. It would have provided mostly resource transfers which are one-time consumption
subsidies rather than additions to investment. Such a large bilateral aid increase would be
unacceptable to the public and the Congress, and would probably not have had the desired catalytic
effect even if approved.

Key Facts About the Program
•

The Reagan proposal would permit an increase of $200 million more than the 1981 level,
indicating the importance of bilateral aid as a development and foreign policy tool.

•

AID programs will be reoriented to encourage U.S. and LDC private sector participation in
the development process. This will concentrate more assistance on countries whose market
orientation gives promise of economic growth and will, over time, reduce the burden on
donor governments which provide official development assistance.

329

P.L. 480—Food Aid
Agency: Department of
Agriculture

Functional
Code: 151

Funding

($ in millions)
1982

1983

1984

1,305
1,471

1,263
1,263

1,273
1,273

1,429
1,429

1,521
1,521

1,532
1,532

-76
-76

-100
-100

-110
-110

-266
-266

-358
-358

-369
-369

1,229
1,395

1,163
1,163

1.163
1,163

1,163
1,163

1981
CARTER BUDGET:
Budget Authority
Outlays
REESTIMATES & ADJUSTMENTS:
Budget Authority
Outlays
PROGRAM CHANGES:
Budget Authority
Outlays
REAGAN BUDGET:
Budget Authority
Outlays

Budget Reform
Criterion: 6
1985

1986

Program Description
The Public Law 480 food aid program provides low interest loans to foreign governments for food
imports, mainly wheat, under Title I and provides for direct food donations to needy people under
Tide II through such organizations as CARE and Catholic Relief Service.

Proposed Changes
•

Eliminate the pending $76 million 1981 supplemental request for Title I.

•

Reduce 1982 budget authority by $100 million; $78.2 from Title I and $21.8 million from
Title II.

Rationale
•

The P.L. 480 program is no longer needed as a surplus disposal mechanism and therefore
must be justified as a foreign aid instrument. Unless it is used carefully, food aid through
concessional sales may only serve to subsidize consumption in developing countries with little
prospect that the need for food imports on soft credit terms will ever diminish. The Reagan
Budget proposal would constrain the program by reducing funds available for unspecified
purposes, while its operations are reviewed.

Key Facts About the Program
•

Because P.L. 480 Title I is also financed by repayments of earlier loans, the budget authority
figures understate the size of the total program. In 1982 under the Reagan budget proposal,
Title I financing will be $877 million, and Title II food aid will be $764 million.

•

Total tonnage for the program will decline by only about 10 percent from 1980 actual levels,
from 5.9 to 5.4 million metric tons.

•

The Title I reductions will eliminate unprogrammed funds for emergencies. Now that 1981
is half over, these funds appear not to be needed this year. The 1982 Title I reduction will
still leave $116 million above planned country programs to meet emergencies.

•

The proposed changes will not significantly affect U.S. farm income or prices. The average
$200 million a year outlay reduction during 1981-86 can easily be absorbed by average rates
of growth in export demand.

•

The 1982 Title II program will be 1.7 million tons, the same amount proposed in the Carter
budget. A $22 million reduction in the program merely reflects the elimination of some high
cost foods without reducing tonnage. The Administration is committed to support this
humanitarian program.

330

Peace Corps
Agency: ACTION

Functional
Code: 151

Funding
CARTER BUDGET:
Budget Authority
Outlays
REESTIMATES & ADJUSTMENTS:
Budget Authority
Outlays
PROGRAM CHANGES:
Budget Authority
Outlays
REAGAN BUDGET:
Budget Authority
Outlays

Budget Reform
Criterion: 6
($ in millions)

1981

1982

1983

1984

1985

1986

109
107

122
121

130
127

142
139

155
152

170
167

-3
-2

-27
-24

-35
-32

-47
-44

-60
-57

-75
- 72

106
104

95
97

95
95

Program Description
The Peace Corps recruits, trains, and maintains U.S. volunteers overseas to fill the trained manpower
needs of developing nations and to promote mutual understanding. In 1980, the volunteers provided
5,097 workyears of service in energy, health, education, agriculture, and a range of other fields at the
community level in 61 developing countries.

Proposed Change
The 1981 and 1982 reductions in the Peace Corps budget will be accomplished by concentrating the
program in fewer countries and fewer program areas (e.g., forestry, energy) and by eliminating
activities not directly related to the agency's mission of sending volunteers abroad.

Rationale
•

Reducing the level of effort overseas will have little measurable impact on host country
development.

•

Programs will be continued in most countries where volunteers currently serve, so that there
will be minimal negative political impact.

•

Despite the cutbacks, more than 2,450 trainees will be accepted into the program in 1982,
and volunteers will provide more than 4,500 workyears of service. By 1983, the volunteer
program will stabilize at a level roughly 20% below the Carter 1982 level.

331

Common Fund for Commodities
Agency: Department of the
Treasury

Functional
Code: 155

Funding

Budget Reform
Criterion: 6
($ in millions)

1981
CARTER BUDGET:
Budget Authority
Outlays
REESTEVIATES & ADJUSTMENTS:
Budget Authority
Outlays
PROGRAM CHANGES:
Budget Authority
Outlays
REAGAN BUDGET:
Budget Authority
Outlays

1982

1983

1984

1985

74
15

_ ~

1986

15
-74
-15

39
15

15
15

Program Description
Currently being negotiated under UN auspices, the Common Fund will pool the resources of
participating international commodity agreements to finance buffer stocks which will buy and sell the
commodities on world markets to preclude large random price fluctuations. This stabilization policy
should benefit both producers and consumers. Backed by pooled funds and by direct contributions of
governments, the Common Fund will be able to borrow on more favorable terms than could any
single buffer stock.

Proposed Changes
The U.S. contribution, $73.85 million, would be postponed from 1982 to 1983-1985. This will avoid
seeking funds before they are needed. The deferral of funding is not expected to affect the Common
Fund's program or the U.S. participation in it.

332

Other Agencies

333

ACTION (Domestic Programs)
Agency:DistrictofColumbia

Functional
Code: 506

Funding
1981
CARTER BUDGET:
Budget Authority
Outlays
REESTIMATES & ADJUSTMENTS:
Budget Authority
Outlays
PROGRAM CHANGES:
Budget Authority
Outlays
REAGAN BUDGET:
Budget Authority
Outlays

1982

Budget Reform
Criterion: 6
($ in millions)
1984
1983

1985

1986

165.0
155.7

185.5
182.8

190.7
186.9

195.7
191.8

200.4
196.4

204.7
200.7

0.3

9.3

-5.2
-5.1

-10.2
-6.3

-14.9
-10.9

-19.2
-15.2

-9.3
-3.3

-40.2
-45.2

-51.3
-50.3

-63.0
-63.0

-64.9
-64.9

-67.4
-67.4

155.8
152.7

145.3
147.0

134.2
131.5

122.5
122.5

120.6
120.6

118.2
118.2

Program Description
ACTION domestic programs promote volunteering, seek to demonstrate effects of volunteering, and
recruit and support volunteers to help local organizations work on problems of poverty. Volunteers
receive differing degrees of ACTION support and have differing time commitments. The Volunteers
in Service to America (VISTA) program has full-time volunteers whose living expenses are borne by
ACTION. The part-time volunteers in the programs for older people (Foster Grandparents, Senior
Companions, and Retired Senior Volunteer Program) may be substantially supported or they may
work in programs for which ACTION bears only administrative costs.
Promotional and
demonstration programs are operated directly or supported through grants.
VISTA volunteers work on a variety of community projects. Foster Grandparents work with children
who have special needs. Senior Companion volunteers help other older people maintain independent
living arrangements.
Retired Senior (RSVP) volunteers work on community projects or help
individuals.

Proposed Change
•

Reduce the average number of VISTA volunteers in 1982 from 5,000 in the Carter budget to
2,550, reducing the budget authority proposed in January from $42.8 million to $20.7 million.

•

Reduce promotional programs from $14.9 million to $5 million. This will cut.out expansions
of demonstrations of volunteer activities proposed in the Carter budget and reduce Federal
funding for youth volunteers in school $1 million below current services.

•

Keep all three ACTION programs for Older Americans at the current level, eliminating the
Carter proposed 1982 expansion of the Senior Companions program that would have
provided for 20 more grants to support 1,040 new Senior Companions' volunteers.

•

Rescind excess 1981 budget authority to forestall 1981 expansions of VISTA and Senior
Companions toward 1982 levels that were planned in the Carter budget.

Rationale
These reductions are part of fiscal restraint proposals. The necessity of reducing Government
spending requires placing a greater reliance on the normal voluntary activity in the private sector. The
major program that is reduced - VISTA - costs the Government the most per volunteer. Supporting
each VISTA volunteer costs the Government about $10,000 a year. Comparable amounts for the
other programs are about $3,600 for Senior Companions, $3,300 for Foster Grandparents, and $126
for RSVP.
The Reagan Budget amounts will let ACTION preserve current levels in the three programs for older
people and maintain its commitment to help older Americans help themselves.

335

Appalachian Regional Commission
Agency: Appalachian Regional
Commission

Funding
CARTER BUDGET:
Budget Authority
Outlays
1
REESTIMATES & ADJUSTMENTS:.1/
Budget Authority
Outlays
PROGRAM CHANGES:
Budget Authority
Outlays
REAGAN BUDGET:
Budget Authority
Outlays
17

Budget Reform
Criterion: 4

Functional
Code: 452
($ in millions)
1984
1983

1985

1986

400
390

430
420

460
449

-234
-76

-250
-163

-270
-224

-289
-246

-129
-60

-139
-77

-150
-101

-160
-105

-171
-167

254

207

126

1981

1982

343
330

344
325

373
360

-215
-11
-110
-6
233
324

Beginning in 1982 the Appalachian Highway Program is transferred to the Federal Highway Administration

Program Description
The Appalachian Regional Commission provides grants to the thirteen Appalachian States for
economic and community development and for improving highway access to Appalachia.
•

The area (economic) development programs provide funding directly to the States, or
through other Federal agencies, for community infrastructure, housing, economic
development and job creation, resource development, and planning projects.

•

The Appalachia highway program provides for construction of the Appalachian Development
Highway System and for access roads to places of potential economic development.

The Carter budget proposed holding both the area development and highway programs basically at
the 1981 funding levels in 1982.

Proposed Change
Federal funding for the non-highway programs of the Appalachian Regional Commission will be
terminated immediately, saving $110M in 1981.
The Appalachian highway program will be transferred to the Federal Highway Development
Administration and funded out of the Highway Trust Fund beginning in 1982. Only the Appalachian
Development Highway System will be funded in the future. Like the economic development
activities, the access roads programs will be terminated.

Rationale
This is part of the Administration's overall effort to apply sound criteria to economic subsidy
programs.
In the more than fifteen year history of the Appalachian program a number of positive changes have
taken place (i.e., population in-migration, improved per capita income, education, and health, and
reduced poverty-level population). While some problems may still exist, the Region must proceed on
its own and use the capabilities developed at the State and local level to address these problems.
Future improvements in economic and social well-being in Appalachia will be stimulated through
general improvements in the economic condition of the nation as a whole, including Appalachia.
The Administration's program of general tax, fiscal and regulatory reductions will support growth in
the Appalachian region, thus providing the means to address specific problems or needs in Appalachia
without the necessity of a direct Federal program. In 1980, the thirteen Appalachian States obligated
about $128M in non-highway ARC funds. The Administration's program will generate tax savings
(i.e., personal tax reductions) of $4.9 billion, in 1981 growing to $42 billion in 1984 for these same
thirteen States.

336

Key Facts About the Program
Changes that have taken place in Appalachia since establishment of the ARC are as follows:
•

Population. From 1970 to 1980, the Appalachian region grew an average of about 100,000 a
year from in-migration.

•

Jobs. Between 1965 and 1978, the Region added about 1.8 million jobs.

•

Unemployment. Appalachians official unemployment rate has been reduced to a level more
nearly approximating that of the nation. Unemployment in the early 1960's was nearly
double that of the nation.

•

Per capita income. Between 1965 and 1978, Appalachian total personal income per capita
climbed from 78% to 84% of the national average.

•

Poverty. The poverty population has decreased from 31% in 1960 to about 14% in 1976.

•

Education. The adult population completing high school has risen from about 33% to in
1960 to about 53% by 1976.

337

iVrchitectural Transportation Barriers Compliance Board (ATBCB)
Functional
Code: 751

Agency: ATBCB

Budget Reform
Criterion: 8

Funding
1981
CARTER BUDGET:
Budget Authority
Outlays
REESTEVIATES & ADJUSTMENTS:
Budget Authority
Outlays
PROGRAM CHANGES
Budget Authority
Outlays
REAGAN BUDGET:
Budget Authority
Outlays

2.4
2.1

1982
2
2

2
2

—

($ in millions)
1984
1983

1985

1986

3
2

3
3

-0.1
-0.1

-0.2
-0.2

-0.3
-0.2

-0.4
-0.3

2.9
1.9

2.8
2.8

2.7
2.8

2.6
2.7

2.4
2.1

Program Description
The Architectural and Transportation Barriers Compliance Board was established by the
Rehabilitation Act of 1973 to ensure compliance with the Architectural Barriers Act of 1968. The Act
requires that buildings and facilities which are constructed, altered, or leased by the Federal
Government be accessible by handicapped persons. The Act also requires that four agencies (DOD,
HUD, GSA, and the Postal Service) establish standards to ensure accessibility. ATBCB annually
processes about 150 complaints from the public; about 99 percent are resolved without litigation or
further enforcement action.

Proposed Change
Termination of ATBCB by requesting no funding for 1982.

Rationale
ATBCB provides an unnecessary regulatory layer within the Executive Branch. Failure to fund
ATBCB should riot result in any deterioration in the progress being made to improve accesibility by
the handicapped to federally owned and leased buildings. ATBCB activities can be subsumed by
activities of other agencies as authorized by the Architectural Barriers Act of 1968 and Section 504 of
the Rehabilitation Act of 1973. Accessibility complaints can be made directly to responsible agencies
for resolution.
At present, all Federal agencies have either promulgated final 504 regulations or have been instructed
by OMB to finalize their regulations and submit them to the Justice Department for review and
approval.
These regulations have in the past been uncoordinated by the agencies promulgating them, which led
to the establishment of inconsistent standards and ineffective enforcement. Executive Order 12250
delegates authority to the Attorney General for coordinating enforcement of Section 504 of the
Rehabilitation Act, as well as the enforcement of laws prohibiting other forms of discrimination in
programs receiving Federal financial assistance. This new coordination authority will enable the
agencies with Section 504 responsibilities to enforce their own laws more effectively. The Justice
Department's staff resources in this area include 41 positions for coordinating agency activities. The
Department can also draw upon the agencies' staffs for assistance.
The efforts the ATBCB to ensure compliance with the Architectural Barriers Act of 1968 have led to
much bickering and bad feeling among the Federal agencies involved. The ATBCB efforts may even
have been counterproductive because each agency is reluctant to make changes for the handicapped
because of the fear that the ATBCB may further tighten compliance standards. Coordination among
the four standard-setting agencies by a coordinating committee will speed up the issuance of standards
by each agency. It will therefore also speed up compliance with the Barriers Act. The General
Services Administration, upon termination of ATBCB, will coordinate Federal activities required by
the Architectural Barriers Act.

338

Key Facts About the Program
•

ATBCB is composed of eleven general public members (nine of whom are handicapped) and
eleven Federal members.

•

On January 16, 1981, ATBCB promulgated regulations establishing minimum guidelines and
requirements for standards pursuant to the Architectural Barriers Act and took the unusual
step of making them effective immediately. The Administration believes these regulations
have cost implications that were inadequately assessed in the rule-making process.
For example, the Committee of Independent Telephone Manufacturer has filed a petition
with ATBCB to revise its minimum standards requiring that telephones be located no more
than 48 inches from the ground and telephone booths be 48 inches wide to accommodate
side access from a wheelchair. The petition cites research that fewer than one percent of
persons in wheelchairs (1/100 of 1 percent of the total population) would benefit from the 48
inch height. The petition estimates the cost of this guideline on telephone enclosure
manufacturers would be about $10 million for redesign. In addition, these manufacturers
have about $15 million worth of enclosures in inventory with a 54 inch height which would
be unusable.

•

Another example of ATBCB policies and regulations is ATBCB litigation against the
Department of Transportation (DOT) and the City of Chicago, currently under consideration
by an administrative law judge. Chicago is renovating its "State Street Mall" initially
estimated to cost about $19 million. The renovation project will provide eight escalators
leading to an underground mezzanine.
The ATBCB litigation would require the installation of eight elevators (450 f t apart) at an
additional cost of about $20-28 million. While both DOT and Chicago would agree to
install one elevator, ATBCB is insistent thai all entrances must be fully accessible. The
ATBCB actions intrude on DOT attempts to administer its Section 504 regulations.

339

CAB Subsidy Elimination
Functional
Code: 402

Agency: Civil Aeronautics
Board

Funding
CARTER BUDGET:
Budget Authority
Outlays
REESTIMATES & ADJUSTMENT:
Budget Authority
Outlays
PROGRAM CHANGES:
Budget Authority
Outlays
REAGAN BUDGET:
Budget Authority
Outlays

Budget Reform
Criterion: 4
(S in millions)
1984
1983

1981

1982

144
148

144
144

143
143

138
139

123
124

97
99

—

-56
-51

-64
-64

-54
-54

-34
-34

-2
-2

88
93

79
79

84
85

89
90

95
97

144
148

1985

1986

Program Description
The 406 airline subsidy program, administered by the Civil Aeronautics Board (CAB), was created in
1983 in order to develop the air tranpsortation industry in the United States, and to improve mail
service. Subsidized service is scattered all over rural parts of the country.
In 1978 an additional airline subsidy program (419) was created to ensure essential levels of service to
all local communities that would lose airline service as a result of deregulation.

Proposed Changes
The 406 program will be eliminated. All communities currently receiving 406 service will either
receive service from unsubsidized airlines or will be eligible for subsidy under the 419 "essential air
service" program.

Rationale
•

Since creation of the 406 program the airline industry has matured. It is now financially
sound. This eliminates the need for the program, which has cost the government $380
million in the past 5 years.

•

There are airlines now receiving government subsidy for service to communities where
nonsubsidized airlines are willing and able to provide sendee.

•

The 419 subsidy program to local communities ensures that service is provided to every
community that would lose service as a result of eliminating the 406 program.

•

Fuel will be conserved as commuter planes replace jets in communities where demand is
low.

•

The existing law provides for gradual phase-out of the 406 program. In 1986 it is to
disappear totally. This has already caused affected airlines and communities to prepare
alternatives to 406 service.

Key Facts About the Program
•

406 subsidizes 12 airlines: Republic, Frontier, Republic West (formerly Hughes Air West),
Piedmont, Ozark, Cochise, Air Midwest, Sky West, Air New England, Alaska,
Kodiak-Western, and Wien.

•

Republic and Frontier are currently receiving the highest 406 subsidies. Republic is eligible
for $34 million in 1981, Frontier — $23 million. Frontier has already written to the
President pledging support for the Administration's position.

340

•

The Civil Aeronautics Board's experience with the 419 program indicates that 35 percent of
the communities currently receiving 406 subsidized sendee in the "lower 48" will
immediately be served by unsubsidized airlines if 406 is terminated. Unsubsidized airlines
will be willing to replace 406 carriers because these communities have high demand for
airline sendee (over 100 enplanements per day).

•

The Board's experience also indicates that within eighteen months more than 60 percent of
the communities now receiving 406 subsidy will receive unsubsidized airline service. These
communities are eligible for over $64 million in 1981 under the 406 program.

•

419 service is a more cost effective program than 406 because it funds a fixed amount of
service provided by appropriately sized aircraft. Under the 406 program, on the other hand,
the Board has no control over the equipment choice or schedules of subsidized airlines. This
has resulted in the Board's subsidizing excessive use of large equipment and more frequent
service than can be profitably sustained.

•

No community in Alaska will lose service because of terminating the 406 program. The cost
of the 419 program in Alaska will be less than the cost of the 406 program because there are
so many unsubsidized carriers already competing with subsidized carriers in that State.
Unsubsidized carriers will be able to replace 406 carriers in about 75 percent of the currendy
subsidized points.

341

Community Services Programs
Agency: Community Services
Administration (CSA)

Functional
Code: 506

Funding
CARTER BUDGET:
Budget Authority
Outlays
PROGRAM CHANGES:
Budget Authority
Outlays
REAGAN BUDGET:
Budget Authority
Outlays

Budget Reform
Criterion: 7
(S in millions)
1983
1984

1981

1982

536
584

542
544

542
542

-542
-297

-542
-542

536
584

1985

1986

542
542

-542
-542

247

Program Description
The Community Services program finances three main activities: (1) community action agencies (over
900) which administer programs for low-income people at the local level, (2) community economic
development which promotes local development through 32 community-based organizations, (3)
miscellaneous, narrow categorical activities, e.g., for migrant workers, services for low-income elderly
persons. These programs as a cluster help low-income people at the local level identify their needs,
mobilize resources, administer local programs, and coordinate service delivery for the low-income
population.

Proposed Changes
Authority to carry out activities of the kind financed by the community services program would be
available under the proposed social services block grant, with the exception of community economic
development which would be covered under the community development support assistance authority
administered by HUD. Since CSA would not continue as a separate agency after 1981, a loan fund
and a revolving fund which it administers would be transferred to agencies operating similar
programs.
Decisions regarding the availability of funds for services similar to those provided by CSA will be
made at State and local levels.

Rationale
As part of the effort to return decisionmaking authority to the State and local levels, to eliminate
overlap and duplication, to promote coherence in Federal program delivery, and to reduce waste and
inefficiences in program management, the authority to undertake activities financed by the community
services program will be consolidated into social services block grants.
These changes are expected to enable States to plan and coordinate their own programs according to
their own priorities, and with greater flexibility. Administrative costs are expected to decrease and the
array of rules and regulations accompanying categorical programs would be eliminated.

Key Facts About the Program
•

CSA makes about 1600 grants to community action agencies (CAA's) for local initiative
activities.

•

GAO issued reports criticizing CSA's audit operations: "Grant auditing, or a maze of
inconsistancy, gaps and duplication" (June 15, 1979). "Quality testing of audits of grantee
records; improvements needed" (July 19, 1979).

•

CSA weak financial controls make it vulnerable to fraud and abuse, according to a GAO
report. (FGMSD-80-73)

342

Consumer Product Safety Commission
Agency: Consumer Product
Safety Commission

Functional
Code: 554

Funding
CARTER BUDGET:
Budget Authority
Outlays
REESTIMATES & ADJUSTMENT:
Budget Authority
Outlays
PROGRAM CHANGES:
Budget Authority
Outlays
REAGAN BUDGET:
Budget Authority
Outlays

Budget Reform
Criterion: 6
(S in millions)
1984
1983

1981

1982

44
44

45
47

45
45

-2
-2

-12
-12

42
42

33
35

33
33

1985

1986

Program Description
CPSC identifies unreasonable hazards associated with consumer products and seeks to control them
through education of consumers, obtaining voluntary changes in production by manufacturers or,
when necessary, promulgation and enforcement of rules regulating or banning hazardous products.

Proposed Changes
Budget authority and outlays are proposed to be decreased by $2 million in 1981 and $12 million in
1982 through selected reductions in field activities, modifying the hospital-based acute injury
surveillance systems, limiting expansion in chronic chemical hazard regulation, restricting compliance
and enforcement activities, and increasing efficiency of organization.

Rationale
By cutting back lower-priority activities, this proposal would impose needed fiscal restraint, without
jeopardizing the agency's statutory mission. CPSC's success in recent years in controlling the most
important acute hazards has lessened the need for expensive surveillance activities. Success in
achieving voluntary industry compliance and improved cooperation with State and local consumer
protection agencies means enforcement activities can be limited. Unanswered questions .about the
human health impact of chronic chemical exposure indicate a need for more research, not more
regulation, in this area.

Key Facts About the Program
•

Increased funding will be provided for the HHS National Toxicology Program.

•

Interagency regulatory coordination for toxic chemicals is provided by the Interagency
Regulatory Liaison Group.

343

Corporation for Public Broadcasting
Functional
Code: 503

Agency:DistrictofColumbia

Funding
CARTER BUDGET:
Budget Authority
Outlays
REESTEVIATES & ADJUSTMENTS:
Budget Authority
Outlays
PROGRAM CHANGES:
Budget Authority
Outlays
REAGAN BUDGET:
Budget Authority
Outlays

1981

1982

162
162

172
172

—

-43
-43

162
162

129
129

Budget Reform
Criterion: 6
($ in millions)
1984
1983

1985

1986

183
183

198
198

210
210

-11
-11

-26
-26

-38
-38

-52
-52

-62
-62

-72
-72

120
120

110
110

100
100

172
172

Program Description
CPB is the primary vehicle for providing Federal financial assistance to the 217 radio and 170
television stations that currently compose the non-commercial broadcasting system.

Proposed Change
The Administration has proposed a 25 percent reduction in 1982 funds for the Corporation for Public
Broadcasting. Additional reductions are proposed for 1983 and 1984. Total reductions will produce
savings of $301 million between 1982 and 1986. The reductions will be primarily directed at CPB's
administrative costs and national program production, while CPB support for local stations will be
maintained at as high a level as possible.

Rationale
This reduction is part of the President's Economic Recovery Plan. Noncommercial stations should
determine the need for and type of programs they require and be allowed, greater discretion to finance
their own productions.
The contribution of public broadcasting to society is debatable, but one fact is clear: the prime
beneficiaries of a public broadcasting station are its listeners and viewers. Any benefit which nonlisteners and non-viewers receive from the Corporation for Public Broadcasting (CPB) is purely
conjectural and more than likely nonexistent. Thus, there is no overriding national justification for
the funding of CPB.
Moreover, the audience of CPB-supported stations tend to be wealthier and more educated than the
general populace; they certainly possess the personal resources to support such stations and they
should do so, if they want ot enjoy the benefits of public broadcasting. Taxpayers as a whole should
not be compelled to suybsidize entertainment for a select few.
Fears that the proposed reduction in CPB would cripple public broadcasting are highly exaggerated.
The proposed reduction would still leave most of the program in place. Public broadcasting is well
enough established that its appeals for donations and support should be taken seriously. If they are
not - - if the viewing and listening public is not sufficiently interested in public broadcasting's fUture
to provide adequate financial support - - then there is even less reason why those who choose not or
can not listen to such stations should be forced to pay taxes to support them.

344

Key Facts About the Program
During the period between FY 1973 and FY 1979 Federal support essentially leveled off. However,
during the same period support from subscribers, business and industry showed significant increases
(e.g., in 1973 private support supplied $55 million of the total financing; in 1979 it supplied almost
$164 million).
Recent breakthroughs in new technologies have offered an incredible array of equipment designed to
reach new markets. The advance of cable T.V., as well as the combined mass-effect of the marketing
of video taperecorders and tapes, laser-discs and satellite earth stations, will significantly impact the
variety and availability of quality programming to the public.

345

Wage and Price Standards Program
Agency: Council on Wage and
Price Stability

Functional
Code: 802

Funding
CARTER BUDGET:
Budget Authority
Outlays
REESTIMATES & ADJUSTMENTS:
Budget Authority
Outlays
PROGRAM CHANGES:
Budget Authority
Outlays
REAGAN BUDGET:
Budget Authority
Outlays

Budget Reform
Criterion: 6
(S in millions)
1983
1984

1981

1982

9.4
9.4

2.9
4.4

3.1

3.2

—
—

—
--

—
—

-4.1
-5.2

-2.9
-4.4

—
-3.1

—
-3.2

—

5.3
4.2

—

1985

1986

—
—

Program Description
In 1978, President Carter issued Exectuive Order 12092, directing CWPS to expand its monitoring
efforts and to begin a program of voluntary pay and price standards, and directing the Office of
Federal Procurement Policy to issue regulations denying Federal contracts to violators of the
standards. Business and labor viewed the guidelines as burdensome, biased, and ineffective. There
was widespread dissatisfaction with the pay and price restraints.
The CWPS staff grew from 42 in 1974 to 238 in 1979.

Proposed Change
President Reagan signed Executive Order 12288, which terminated the voluntary wage and price
standards program initiated under President Carter. The Administration has proposed rescission of
unnecessary funds in 1981. Extension of the current authorization for the agency which expires on
September 30, 1981, will not be sought.

Rationale
The Administration has ended the wage and price standards program because of the voluminous
reporting burden that was imposed on businesses under this program, and because these standards
proved to be totally ineffective in halting the rising rate of inflation.

Key Facts About the Program
•

While CWPS was in existence, inflation reached its highest level of the past ten years. The
program was literally ineffective.

•

The confidential business data submitted to CWPS will be destroyed.

346

District of Columbia
Borrowing from the U.S. Treasury
Functional
Code: 852

Agency: District of Columbia

Funding
1981
CARTERBUDGET:
Budget Authority
Outlays
REESTOIATES & ADJUSTMENTS:
Budget Authority
Outlays
PROGRAM CHANGES:
Budget Authority
Outlays
REAGAN BUDGET:
Budget Authority
Outlays

465.0
467.7

1982

Budget Reform
Criterion: 5
($ in millions)
1984
1983

1985

1986

580.6
606.5

580.0
585.5

503.7
503.7

466.3
466.3

476.4
476.4

-38.6
-74.5

-83.9
-99.4

+ 13.6
-141.4

+ 71.3
-83.7

+ 85.4
-69.6

542.0
532.0

496.1
486.1

517.3
362.3

537.6
382.6

561.8
406.8

-60.0
-60.0

—

405.0
407.7

Program Description
Loans to the District of Columbia
The District of Columbia has exclusively financed its capital improvement projects by borrowing from
the U.S. Treasury at the prevailing Treasury rate. The payback period for each loan is 30 years in
equal annual payments. The loans outstanding as of September 30, 1980, totalled $1.4 billion.
Because of congressional concern about the District's financial position, the Congress has authorized
the City to continue borrowing from the Treasury for capital projects until it can enter the bond
market.

Proposed Change
The Administration proposes to cap the capital improvement borrowing at $155 million in budget
authority and to phaseout the District borrowings from the Treasury by 1984. This action would
reduce the 1982 outlays by $74.5 million.

Rationale
This action is part of the Administration's effort to stretch out and retarget public sector capital
improvement programs. The District should not substantially increase its long-term capital borrowing
at the same time it is trying to enter the bond market to finance its deficit It is anticipated that the
District of Columbia Government will enter the municipal bond market, and thus, will have no
further need to borrow from the U.S. Treasury after 1983. The Administration's proposed termination
by 1984 of the District's borrowing from the U.S. Treasury for capital projects is consistent with the
theme of Section 461 of the Home Rule Charter—which was to facilitate District access to the private
capital market.

Key Facts About the Program
•

It is more costly for the District to borrow from the U.S. Treasury than if the City sold
bonds to finance capital expenditures in the commercial bond market. If the City were in
the private bond market, it would save the District millions of dollars each year.

•

The District should make every effort to slow the growth in its long-term debt while it is
trying to acquire an acceptable bond rating to- enter the bond market. The Carter budget
proposed to increase borrowing for new capital investments substantially from the 1980 and
1981 levels of $104 million and $131 million to $194 million in 1982. Actual draw down of
these loans was expected to more than double during this period.

•

On behalf of the District, Congressman Fauntroy has recently introduced legislation that
would permit the City to enter the commercial bond market.

347

Executive Office of the President Resources
Agency: Executive Office of the
President

Functional
Code: 806

Funding
1981
CARTER BUDGET:
Budget Authority
Outlays
REESTIMATES & ADJUSTMENTS:
Budget Authority
Outlays
PROGRAM CHANGES
Budget Authority
Outlays
REAGAN BUDGET:
Budget Authority
Outlays

1982

Budget Reform
Criterion: 8
(S in millions)
1983
1984

1985

1986

117
115

121
118

110
108

111
111

111
112

122
115
-8

^
—

-6
-7

-5
-7

-8
-9

-11
-9

-13
-12

104
101

105
104

106
105

106
106

107
106

107
107

Program Description
The Executive Office of the President provides funds for the maintenance of the White House and the
Vice President's residence, and for staff support to the President on a wide range of topics, including
budgetary matters, the environment, science and technology, and national security.

Proposed Change
The Administration plans to reduce the number of full-time permanent positions in the Executive Office by over
12% in 1981 and proposes to maintain this reduced level through 1982. This reduction comes primarily from three
areas.
•

The voluntary wage and price standards program initiated by President Carter will be
terminated.

•

Activities of the Council on Environmental Quality will be limited to only those statutorily
mandated.

•

Science and technology staffing will be substantially reduced.

Rationale
This proposal is an integral component of the Administration's efforts to reduce Federal overhead and
personnel costs.
The termination of the wage and price standards program will help to fulfill the President's pledge to
remove the unnecessary burden of Federal reporting requirements from the public.
The Administration believes strongly that the Executive Office must lead the fight against increased
government spending. A 12% reduction in full-time permanent positions substantially exceeds the
general government-wide targets imposed by OMB.

348

Export-Import Bank
Agency:DistrictofColumbia

Functional
Code: 155

Budget Reform
Criterion: 4

Funding
CARTER BUDGET:
Budget Authority
Outlays
REESTEVIATES & ADJUSTMENTS:
Budget Authority
Outlays
PROGRAM CHANGE:
Budget Authority
Outlays
REAGAN BUDGET:
Budget Authority
Outlays

(S in millions)
1984
1983

1982

1981

1985

1986

7,021
2,350

4,594
2,657

4.648
2,702

5,315
2,366

6,027
2,639

6,704
3,029

-106
81

-49
-363

-158
-406

-284
-32

-395
-198

-506
-281

-748
-70

-571
-236

-891
-523

-1,266
-782

-1,690
-1,026

-2,117
-1,248

6,167
2,361

3,974
2,058

3.599
1,773

3,766
1,552

3,942
1,359

4,081
1,500

Program Description
The Export-Import Bank provides credit support for the sale of American goods and services overseas
in the form of:
•

long-term direct loans to purchasers of U.S. exports,

•

discounting (refinancing) of medium-term commercial bank credits,

•

guarantees of privately originated loans, and

•

loan insurance against defaults by foreign purchasers.

The size of the Bank's annual program is established by limitations in appropriations acts on direct
loan obligations and on commitments to guarantee loans. The difference between the Carter and
Reagan budget proposals for new authorizations are shown in the table below.

Proposed Changes
The Administration proposes to:
•

reduce new direct and discount loan authorizations by $752 million in 1981 to $5,148 million
and by $600 million in 1982 to $4,400 million.

•

reduce loan guarantee authorizations by $1.0 billion in 1981 to $7,559 million and by $1.2
billion in 1982 to $8,220 million.
Limitations on New Authorizations
(S in millions)

Authorization Levels
CARTER BUDGET:
Direct loan limitation
Direct loans
Discount loans
Loan guarantee limitation
PROGRAM CHANGE:
Direct loan limitation
Direct loans
Discount loans
Loan guarantee limitation
REAGAN BUDGET:
Direct loan limitation
Direct loans
Discount loans
Loan guarantee limitation

1982

1983

1984

1985

1986

5,900
5,500
400
8,560

5,000
5,000

5,500
5,500

6,050
6,050

6,650
6,650

7,300
7,300

9,420

10,360

11,400

12,540

13,800

-752
-752
-1,001

-600
-1.000
400
-1,200~

-810
-1.210
400
-1,540

-1,090
-1,490
400
-2,040

-1,440
-1.840
400
-2,660

-1,850
-2,250
400
-3,430

5,148
4,748
400
7,559

4,400
4.000
400
8,220

4,690
4,290
400
8,820

4,960
4,560
400
9,360

5,210
4.810
400
9,880

5,450
5,050
400
10,370

1981

349

Rationale
President Reagan proposes to reduce or eliminate federal subsidies to business. He believes that
American business should be required to compete in the market, unfettered by unnecessary
government restrictions but unaided by special government privileges. In particular, he thinks it
unfair that taxpayers should be forced to share the interest costs of private, profit-making — and
often larger - - corporations engaged in export enterprise.
The policy of using the Export-Import Bank "as a vehicle for meeting foreign export subsidy programs
has not been justified by documented offsetting gains in economic efficiency. The Export-Import
Bank has grown so rapidly in the past few years, and its lending policies have become so generalized,
that the Bank's credit "facilities have become widely regarded as virtual entitlement programs. That
private businesses should be "entitled" to special taxpayer subsidies is a concept firmly rejected by
this administration.
The need for restraint is obvious. In particular:
•

Between 1977 and 1981, the Carter Administration planned to increase direct lending activity
by 600%, and to nearly double loan guarantees for the Export-Import Bank.

•

During 1980, the Bank's average interest rate for direct loans, 8.5%, was only about
two-thirds of the rate that U.S. corporations paid for comparable borrowing in the private
sector.

•

The Bank's lending rates have even fallen below its cost of borrowing at relatively low U.S.
Government borrowing rates which is projected to cause the government to lose $100 million
on the Export-Import Bank's operations in 1982.

Cutting back on this program will not have a significant adverse impact on our trade posture:
•

The Bank's subsidy to foreign borrowers (estimated by the Congressional Budget Office to
be between $200 million and $1 billion in 1980 alone) results in 'a low rate of return to our
economy and drains away badly needed capital that results in reducing or eliminating our
benefits from trade.

•

The United States international accounts are now strong, particularly with respect to the
other major industrial nations. The U.S. current account balance has improved by $15
billion since 1978, while those of Germany and Japan have declined by $25 billion. In
addition, the U.S. share of world trade stabilized during the 1970's and has increased in
recent years. Fluctuations in U.S. export performance are a result primarily of cyclical
changes in the U.S. and foreign economies, and not of growth in the Bank's direct lending.
In fact, the direct loan program finances only 2-3 percent of U.S. exports.

A far better way to promote U.S. exports is to make the American economy more productive and to
reduce domestic inflation. Inefficient, market-distorting programs such as the Eximbank make such
overall economic improvements more difficult, and thus, in a larger perspective, can hamper our trade
posture. Placing appropriate restraints on this and similar business programs is an productivity and to
fight inflation

350

Flood Program
Agency: Federal Emergency
Management Agency

Funding
CARTER BUDGET:
Budget Authority
Outlays
REESTLMATES & ADJUSTMENTS:
Budget Authority
Outlays
PROGRAM CHANGES:
Budget Authority
Outlays
REAGAN BUDGET:
Budget Authority
Outlays

Budget Reform
Criterion: 3

Functional
Code: 453
1981

1982

561
230

214
214

($ in millions)
1984
1983
210
230

214
252

-448
—

—

1985

1986

236
270

257
283

38
—

30
—

—

-99
-97

-Ill
-115

-121
-125

-129
-132

-135
-137

113
230

115
117

124
115

136
127

145
138

151
146

Program Description
This program provides nation-wide flood insurance to businesses and individuals. It has evolved into
a subsidized insurance program that cost the Federal Government over $380 million in 1980. Rates in
subsidized portions of the program have not been increased since 1972, when they were actually
lowered from previous rates.

Proposed Change
The Administration proposes to raise the rates in the program back to their pre-1972 levels.
Residential rates will increase from $.25 to $.40 per $100 of coverage. This — together with several
minor adjustments - - will reduce outlays by 45% in 1982, and will result in total savings of over $600
million from 1982-1986. It will substantially reduce the Federal subsidy to those insured under this
program.

Rationale
This change supports the Administration's policy of recovering clearly allocable costs from users.
Currently, the taxpayers have been paying out almost three dollars in losses per each dollar received
in premium income. People who receive the benefits of flood insurance should pay its costs. This
change will eliminate a substantial portion of the subsidy that the taxpayer now provides and further
discourage uneconomic development in flood prone areas.

Key Facts About the Program
The following table displays the current and proposed rate structures per $100 of coverage:
Old Rates
Structure
Contents
resident
.25
.35
non-resident (business, etc.)
.40
.75
New Rates
resident
.40
.50
non-resident
.50
1.00
The program resulted in outlays of $382 million in 1980 and $239 million in 1979. Average claim size,
number of persons covered, and number of claims—not to mention general inflation levels—have all
increased over the past few years while uneconomic rates have not changed.
The following table shows average premium per subsidized policy of $30,473:
1981
1982
1983
1984
1985
Current
$ 91
110
110
110
110
Proposed
91
159
159
159
159

351

1986
110
159

General Staff Reduction, FTC
Agency: Federal Trade
Commission

Functional
Code: 376

Funding
CARTER BUDGET:
Budget Authority
Outlays
REESTEYIATES & ADJUSTMENTS:
Budget Authority
Outlays
PROGRAM CHANGES:
Budget Authority
Outlays
REAGAN BUDGET:
Budget Authority
Outlay's

Budget Reform
Criterion: 6

1981

1982

($ in millions)
1984
1983

74.3
73.3

77.9
76.5

80.0
79.2

-3.5
-4.3

-8.5
-8.4

70.8
69.0

69.4
68.1

1985

1986

81.7
80.1

83.4
818

85.2
83.3

-15.4
-15.9

-20.3
-19.9

-22.5
-22.1

-24.8
-24.1

64.6
63.3

61.4
60.2

60.9
59.7

60.4
59.2

Program Description
The Federal Trade Commission is an independent regulatory agency with three primary missions:
competition, consumer protection, and economic analysis and reporting. The Bureau of Competition
shares responsibility with the Justice Department's Antitrust Division in the enforcement of antitrust
statutes. Forty-five percent (800) of the FTC staff work on antitrust enforcement, 46% (823) engage
in consumer protection activities, and 97% (161) prepare economic reports and analysis. About 20% of
FTC staff are employed in ten regional offices.

Proposed Change
This proposal would reduce FTC's 1981 budget by 4.7% and the 1982 budget by 10.9%. The change in
funding would result in a general across-the-agency staff reduction and the phasing out of the
regional offices.

Rationale
By imposing fiscal restraints and reduced staffing levels, the reductions described are an integral
component of President Reagan's comprehensive economic plan for spending reductions, tax
reductions, and actions to remove unnecessary regulatory burdens.
The proposed reductions will permit the FTC to refocus, retarget, and pursue the true objectives set
forth in antitrust statutes. The appropriate focus for FTC's antitrust efforts is on major cases that
affect the national economy, price fixing, and other horizontal merger activities that could clearly lead
to a lessening of competition and undermine competitive markets and consumers' welfare.
In the consumer protection area, the Commission has introduced regulations on business that have
failed to demonstrate a positive benefit/cost ratio and have thus passed costs on to consumers. The
FTC has imposed regulations without a clear concept of what harms the consumer, and in many cases
these regulations are impeding the efficient workings of the marketplace.
In recent years, there has been considerable activity at the State, local, and private level to resolve
many of the same problems the FTC attempts to address. Consumers have been able to seek redress
through a variety of formal and informal mechanisms without resorting to Federal administrative law
procedures or to the civil and criminal justice process.
It is possible to reduce resources in the FTC prudently without adversely harming the consumer or
small business. By reducing regulatory and reporting burdens on private business, and eliminating
restrictions on commerce, business will pass savings on to consumers.

352

Key Facts About the Program
In 1970, Federal antitrust enforcement spending was $17 million with 1,200 full-time employees. Today
that number has jumped to $71.5 million with 1,686 full-time employees, an increase of over 400% in
spending. The proposed reductions before Congress would, by 1986, bring spending in the Federal
antitrust area back to the 1980 level. The reductions will produce an overall agency dollar savings of
30%.
The proposed reductions would encourage the FTC to concentrate on antitrust practices that create
diseconomies to consumers, rather than pursue cases based on the rationale that "bigness equates to
anti-competitive behavior," especially in vertical mergers.
State Attorneys General have expanded activity in the antitrust area, another reason for eliminating
the need for the FTC at the local or State level. Court cases, also, have demonstrated the power of
private antitrust actions.

353

Building Construction
Agency: General Services
Administration

Functional
Code: 804

Funding
CARTER BUDGET:
Budget Authority
Outlays
REESTLMATES & ADJUSTMENTS:
Budget Authority
Outlays
PROGRAM CHANGES:
Budget Authority
Outlays
REAGAN BUDGET:
Budget Authority
Outlays

Budget Reform
Criterion: 5
(S in millions)
1984
1983

1981

1982

121
87

148

-121
-12

-7

-27

-79

-26

1985

1986

Program Description
Construction of new Federal buildings is funded through a self-financed, revolving fund in the
General Services Administration (GSA). The Fund is financed from rental receipts that are paid by
each Federal agency for the office space and services that are provided to them by GSA.
The Carter budget proposed a sizeable increase in new construction of Federal buildings. New
obligational authority (not shown in the table above) for construction would increase from $16 million
in 1981 to $196 million in 1982. The largest project is the new headquarters building for the Nuclear
Regulatory Commission in Silver Spring, Maryland.
Other projects ihclude a courthouse in
Birmingham, Alabama and border stations in California, Arizona, and Maine.
The Carter budget also proposed $121 million in borrowing authority from the Treasury to fund
construction in excess of that possible with funds from rental receipts. This borrowing authority was
specifically tied to the construction of the building for the Nuclear Regulatory Commission.

Proposed Change
•

Defer all new construction projects for Federal buildings except for two essential border
stations (Otay Mesa, California and Houlton, Maine).

•

Retain funding for cost increases and other adjustments to existing projects that have already
received some appropriations.

•

Retain funding for acquisitions of existing postal service buildings that have Federal tenants
and are being excessed by the U.S. Postal Service.

Rationale
This stretch out and retargeting of public sector capital improvement projects would allow a
reassessment of new construction needs in light of the sharply reduced levels of Federal personnel. In
addition to these reductions in Federal construction, the amount of leased space will also be reduced.

Key Facts About the Program
The two essential border stations, which are funded, are necessary to fulfill our international
commitments. The Otay Mesa station is a new border crossing point in California and the Houlton,
Maine station must be opened when Interstate 1-95 is completed.
Total construction outlays in GSA remain relatively constant after the Reagan revisions at $60 - 75M
per year. These outlays are primarily due to projects approved in prior years.

354

New funding for the following projects would be eliminated.

TYPE OF
BUILDING

PLACE

Office Bldg.

Silver Spring,
Maryland

132

Courthouse

Birmingham,
Alabama

Border Station

San Luis,
Arizona

Office Bldg.

Vancouver,
Washington

Miscellaneous
Projects

NEW OBLIG.
AUTHORITY

1982

1983

SPENDOUT (S in millions )
1984
1985
1986

•Less than $500,000.
**An additional S19 million would be spent in later years on the NRC building.

355

21**

1
1

Historical Publication and Records Commission Grants
Agency: General Services
Administration

Functional
Code: 804

Budget Reform
Criterion: 6

Funding
1981
CARTER BUDGET:
Budget Authority
Outlays
REESTIMATES & ADJUSTMENTS:
Budget Authority
Outlays
PROGRAM CHANGES:
Budget Authority
Outlays
REAGAN BUDGET:
Budget Authority
Outlays

4
4

1982

($ in millions)
1984
1983

3
3

1985
3
3

1986
3
3

Program Description
The National Historical Publication and Records Commission gives grants to universities,
nonprofit organizations (e.g., historical societies) and institutions, and Federal, state and
governments for preservation and publication of U.S. historical materials. Federal funding for
grants began in 1964 with $350,000; annual funding has grown since that time to $4 million in
The Carter budget proposed a reduction in these grants from $4 million to $3 million in 1982.

other
local
these
1981.

Proposed Change
Federal funding of these grants will be eliminated.

Rationale
In accordance with fiscal restraint on other programs of national interest, these grants should be
eliminated. They are a low priority program that does not need Federal funding. Future research
efforts should depend upon funding through private contributions and from state and local
governments as was the practice prior to 1964.

Key Facts About the Program
The effects of depending totally on non-Federal funding follow:
•

High priority projects will still be funded through private donations or by state and local
governments or universities. For example, since 1965 the founding fathers projects have
received $4 million in Federal funds and $3 million in non-Federal funds.

•

High priority projects will be stretched out without Federal funds but they already take a
long, long time to complete. For example, the five founding fathers projects all began
between 1949 and 1965, and none is finished yet The oldest—the papers of Thomas
Jefferson—began in 1949; so far 19 volumes have been published and 31 volumes remain to
be completed.

Authorization for these grants expire at the end of FY 1981. The expiration of this legislation will
affect only the Federal funding for these grants. All other activities of the Commission, including the
acceptance and distribution of private donations, is already authorized in the statutes of the National
Archives. Therefore, the Administration will not submit any reauthorizing legislation.

356

Sales of Excess Materials
from the National Defense Stockpile
Agency: General Sen ices
Administration

Functional
Code: 054

Funding
1982

($ in millions)
1984
1983

-477
-477

-410
-410

-486
-486

-475
-475

-473
-473

16
16

-9
-9

10
10

24
24

28
28

-507
-507

-75
-75

206
206

-993
-993

-907
-907

-537
-537

-241
-241

-239
-239

1981
CARTER BUDGET:
Budget Authority
Outlays
REESTEVIATES & ADJUSTMENTS:
Budget Authority
Outlays
PROGRAM CHANGES 17 :
Budget Authority
Outlays
REAGAN BUDGET:
Budget Authority
Outlays

Budget Reform
Criterion:
6

-461
-461

1985

1986

proposal to sell additional materials from the stockpile. Total receipts fr<
are as follows:
1982
210
210

1981
210
210

Budget Authority
Outlays

1983
217
217

1984
430
430

1985
436
436

1986
434
434

Program Description
The General Services Administration maintains the National Defense Stockpile of strategic and critical
materials for use in a national emergency.
Over the past twenty years, a number of excess materials have been sold from the stockpile.
However, it still contains approximately $6 billion in materials that have been declared excess by the
national defense agencies. Silver and tin comprise over 80% of this $6 billion in excess materials.
The Carter budget proposed sales of these excess commodities in 1982 that would generate receipts of
$477 million as follows: $267 million of materials currently authorized for sale by the Congress and
$210 million of materials that require congressional authorization (mostly silver sales).

Proposed Change
Accelerate the sales of these excess materials. Specifically, accelerate the sale of silver from 15 million
ounces per year (Carter budget level) to 52 million ounces in 1982. Sales will continue at an average
of one million ounces a week until the excess silver is sold.
Fiscal Year

(Silver sales in millions of ounces)
Carter Budget
Reagan Budget

1981
1982
1983
1984
1985
1986

15
15
15
15
15
15

15
52
52
21

Rationale
These sales are part of the Administration's efforts to reduce waste in the Federal Government by
eliminating unnecessary stockpile holdings.. This increase in receipts from the accelerated sales of
excess silver will (1) provide needed revenues for future acquisitions of required stockpile materials
and (2) avoid needless expenditures for the security, rotation, inspection and other storage costs of
these excess materials.

357

The receipts from these sales will be earmarked under current law for purchases of essential materials
for the stockpile. Every effort will be made to avoid any undue disruption of the usual markets of
producers, processors and consumers of these materials as provided in the Strategic and Critical
Materials Stock Piling Act (P.L. 96-41).

Key Facts About the Program
Sales at this level should not disrupt the market for silver because it is such a speculative commodity.
(By law, stockpile sales must not disrupt the markets for any commodity.) Higher amounts of silver
were sold in the past without disrupting the market as shown below:
•

Approximately 300 million ounces of silver were sold from the stockpile from 1967 through
1970. During the four years of sales, the price of silver rose from $1.78 to $1.83 an ounce.
Prices were generally above the $1.78 level throughout the period. Sales during this period
averaged over one million ounces a week.

There is no strategic need to stockpile silver under any of the national defense scenarios. The annual
U.S. production of silver is ample for national defense purposes.

358

Federal Protective Service
Agency: General Services
Administration

Functional
Code: 804

Funding
CARTER BUDGET:
Budget Authority
Outlays
REESTLMATES & ADJUSTMENTS:
Budget Authority
Outlays
PROGRAM CHANGES 17
Budget Authority
Outlays
REAGAN BUDGET:
Budget Authority
Outlays
17

Budget Reform
Criterion: 8
($ in millions)
1983
1984

1981

1982

1985

1986

116

120

- - -

- --

—
--

—

—
-1

—
- 8

- -15

—
-23

-31

- 32

- 115

—
112

-105

—
97

Amounts are included in the published " Summary tables of Programmatic Decreases to the January budget" under the General Services
Administration heading "Administration Reductions not included above."

Program Description
The Federal Protective Service provides protection to government buildings through mobile patrols
and fixed guard posts. It employs over 3,000 Federal employees and approximately an equal number
of contract guards.

Proposed Change
Reduce the protection of Federal buildings to levels that are similar to the private sector. The
reduction will save 576 positions by the end of 1982 and 1,610 positions by the end of 1986. The
reduction will be achieved entirely through attrition.

Rationale
This is part of the Administration's effort to reduce overhead and personnel costs. The aim of this
reduction is to provide protective levels for office buildings that are similar to those in the private
sector. In effect, the Government will depend more on local police, as was the practice prior to the
build-up of security in the early 1970's.

Key Facts About the Program
This reduction will be implemented slowly through the attrition of current employees. This will avoid
any sudden disruption in security and permit a review by the General Sendees Administration of
those areas where marginal protection should be reduced.
These reductions are sizeable and will lessen the security of Federal buildings. However, the first
phase of the reduction through fiscal year 1982 will eliminate only the sharp increase in'protection
that occurred in the early 1970's, i.e., at the end of FY 1982 the number of personnel in the Federal
Protective Service will still remain above the levels in the late 1960's. Further reductions will occur in
FY 1983 and beyond only after the General Services Administration has completed a review of where
marginal protection can be reduced.

359

The staff history for GS A Guards follows:

YEAR

1966
1967

GSA GUARDS/FEDERAL PROTECTIVE OFFICERS
APPROPRIATED
REIMBURSABLE
TOTAL

2,285
2,329

970
1,018

3,255
3,347

lowest year

* * * * * * * * * * * * * * * * * * *

1970
1971
1972

2,465
4,842
4,561
* * *

1978
1979
108
1981*
1982*

953
1,143
1,103

3,418
5,985
5,664

* * * * * * * * * * * * * * * *

3,455
3,480
3,480
3,078
2,668

1,146
1,203
1,368
1,092
1,002

* Estimate
** Reagan levels remain above the levels in the 1960's.

360

4,601
4,683
4,848
4,170**
3,670**

highest year

International Communication Agency
Agency: International
Communication Agency

Functional
Code: 154

Funding
CARTER BUDGET:
Budget Authority
Outlays
REESTIMATES & ADJUSTMENTS:
Budget Authority
Outlays
PROGRAM CHANGES:
Budget Authority
Outlays
REAGAN BUDGET:
Budget Authority
Outlays

1981

1982

475
484

590
513

Budget Reform
Criterion: 6
($ in millions)
1984
1983

1985

1986

565
582

615
634

663
673

70S
697

-44
-30

-88
-77

-131
-120

-173
-163

-4
-4

-29
-24

-39
-40

-44
-44

-49
-49

470
480

561
489

482
512

483
513

483
504

483
485

Program Description
The International Communication Agency (ICA) conducts academic and leader exchanges; produces
and disseminates media materials; holds seminars on important issues and American life; operates
libraries and cultural centers; acts as press agent for U.S. ambassadors in 125 countries; broadcasts
(Voice of America) in 41 languages; and advises the President, the National Security Council and the
Secretary of State on the foreign public opinion implications of foreign policy issues.

Proposed Changes
•

Major traveling exhibits in the developing world and regional television series will be
eliminated.

•

Academic exchanges and support for private exchanges and the East-West Center will be
reduced.

•

Overseas staffs will be reduced and two branch posts will be closed

•

Reductions will be realized in administrative support, training, and technical improvements.

•

Employees currently being paid at foreign service salary rates but who will not subsequently
be part of the world-wide foreign service system will be converted to the appropriate
General Schedule grades and pay rather than artificially high grades.

Rationale
The proposed reductions eliminate or cut back lower priority activities and call for increased
efficiency in the management of the program. The Voice of America is judged to be the
preferred medium for reaching mass audiences and has not been cut. In a period of fiscal
restraint, it is necessary to reduce administrative and overhead costs.

Key Facts about the Program
•

Exhibits are very expensive and audiences tend not to be those people on whom ICA places
highest priority.

•

U.S. government academic exchanges account for less than 3% of all foreign students
studying in this country; thus a slight reduction in this area should not materially affect
interchange with other countries.

•

The employee compensation change is necessary because, as a result of the Foreign Service
Act of 1980, some employees are being overpaid.

•

Overseas staff reductions will affect primarily foreign national employees and will not
materially affect the agency's ability to conduct its business.

361

Legal Services Corporation
Agency: Legal Services
Corporation

Functional
Code: 752

Budget Reform
Criterion: 7

Funding
CARTER BUDGET:
Budget Authority
Outlays
PROGRAM CHANGES:
Budget Authority
Outlays
REAGAN BUDGET:
Budget Authority
Outlays

(S in millions)
1984
1983

1981

1982

321
328

347
347

364
364

-347
-312

-364
-364

321
328

1985

1986

382
382

401
401

421
421

-382
-382

-401
-401

-421
-421

Program Description
The Legal Services Corporation (LSC) is a private non-profit corporation which funds free civil legal
assistance to the poor through over 300 grantees nationwide. Support centers, training, research, and
overhead are also funded. Appropriations have grown from $72 million in 1975 to $321 million in
1981. The LSC authorization has expired, and terms of all members of the Presidentially-appointed
Board of Directors expire by July.

Proposed Changes
Legal sendees is an authorized activity within the proposed HHS social services block grant. States
will have broad discretion to determine which specific social services best meet local needs and should
be funded. The President will not recommend reauthorization of the Corporation, and will not seek
1982 funding for L S C

Rationale
This change is based on budget reform criteria discussed in the President's February 18 message to
Congress—consolidation of categorical grant programs into block grants to States. This will increase
State priority-setting and control over resources, decrease overhead, and improve coordination among
different social services.
Added pro bono effforts by private attorneys, as part of their professional responsiblity, could
substantially augment legal services funding provided by the block grant. With about 500,000 private
attorneys nationwide, this can be a significant resource for legal services for the poor.

Key Facts About the Program
•

Since 1975, LSC appropriations have had average annual growth of about 35%.
FY
1975
1976
1977
1978
1979
1980
1981

•

Appropriation
(S in millions)
72
90
125
205
270
300
321

% Increase
over prior year
—

25
39
64
32
11
7

According to LSC, nearly $50 million from other Federal, State and local, and private
GAO has reported (HRD 78-164;
sources is currrently available for legal services.
November 6, 1978) that "improved coordination is needed. . .to ensure maximum use of all
potential resources and efficient and effective delivery of free legal services to the poor."

362

•

The American Bar Association (ABA) Code of Professional Responsibility states that:
"The basic responsiblity for providing legal services for those unable to pay ultimately rests
upon the individual lawyer, and personal involvement in the problems of die disadvantaged
can one of the most rewarding experiences in the life of a lawyer. Every lawyer, regardless of
professional prominence or professional workload, should find time to participate in serving
the disadvantaged."

•

Restrictions on advertising, competition, and other barriers to normal market forces for legal
services are being eliminated. This should increase the availability of low-cost legal services,
particularly in "routine" cases such as divorce.

•

Most legal services are now provided by LSC grantees, operating as staff attorney offices
directly handling individual cases. A major Congressional-mandated study has concluded
that other delivery systems which make greater use of the private bar are viable—"judicare"
(operating in conjunction with staff attorneys) and contracts with law firms.

363

National Consumer Cooperative Bank
Agency: National Consumer
Cooperative Bank

Functional
Code: 376

Funding
CARTER BUDGET:
Budget Authority
Outlays
REESTEVIATES & ADJUSTMENTS:
Budget Authority
Outlays
PROGRAM CHANGES:
Budget Authority
Outlays
REAGAN BUDGET:
Budget Authority
Outlays

Budget Reform
Criterion: 6
(S in millions)
1984
1983

1981

1982

122
136

136
128

160
152

-89
-86

-136
-136

32
50

-8

1985

1986

185
178

185
175

200
190

-160
-159

-185
-180

-185
-177

-200
-192

-7

-2

Program Description
The National Consumer Cooperative Bank (NCCB) was created in 1978 to provide financing for
creditworthy consumer cooperative organizations, "soft" loans to potentially viable cooperatives, and
interest subsidies to cooperatives whose members are predominatly low income persons. Under the
Carter budget, the regular lending program would increase its activities ($100 milion), and the
remaining programs would continue to experience slow growth.

Proposed Change
It is proposed to terminate funding for and the activities of the NCCB. All unobligated lending
balances will be rescinded in 1981, and all requests for 1982 funding will be withdrawn. Repeal
legislation hs been proposed, and Treasury will manage and liquidate the existing NCCB loan
portfolio and redeem outstanding capital stock held by the Bank's borrowers.

Rationale
The program reflects the Administration's need to impose fiscal restraint on many programs and to
eliminate programs that are not of national scope or interest.
The National Consumer Cooperative Bank is a heavily subsidized special interest program, one of
many that are contributing to an inflationary Federal budget deficit.
The elimination of this
program will save hundreds of millions of dollars over the next several years and will contibute
significantly toward reducing inflationary pressure. This wall ultimately benefit a broad cross section
of the American public.
There is no compelling evidence that economically viable cooperatives are unable to obtain private
financing. Creditworthy cooperatives with strong , managements that supply their memberships with
necessary goods and services should be able to find private market financing. There is no need for
Federal taxpayers to provide special subsidies for these businesses, and inefficient cooperatives should
not be subsidized.

Key Facts About the Program
Although the National Consumer Coopertive Bank appears to have been created as a self supporting
entity, there are a number of ways in which it is heavily subsidized:
•

While $300 million in startup capital which must be repaid was authorized, salaries and
expenses are funded with separate appropriations which do not have to be repaid. To date
these have totalled over $18 million, and the Carter budget requested an additional $8.7
million for FY 1982.

364

•

All "soft" long term capital advances and interest subsidies are funded with appropriations
that are not required to be repaid to the Treasury under the Act. Instead, repayments of
advances may be reused by the Office of Self Help Development and Technical Assistance
without additional appropriation. To date over $35 million has been appropriated for these
purposes, and the Carter Budget requested an additional $27 milion for 1982.

•

Although the statute appears to require the Bank to pay a dividend on the Federal
investment equal to the Treasury's cost of funds, a 25% ceiling on before tax earnings,
including deductions for loss reserves, effectively brings the reimbursement to Treasury for
its cost of funds to zero. For the over $77 million in Federal purchases of NCCB stock to
date, Treasury has had to pay private investors rates that at times exceeded 15%.

•

The Bank recently withdrew all of its Treasury balances and invested them in marketable
securities, despite an earlier pledge to keep balances in the Treasury until needed for loans.
It currently costs the government over 13 percent to obtain funds in the private capital
markets.

Finally, the NCCB is not a viable organization. It is a Federal bank making loans in often small
amounts to primarily local organizations. Its costs of servicing loans would therefore continue to be
prohibitive. To the extent that co-ops borrow from the Bank, they fail to establish the local banking
relationships important to small and growing businesses.

Loan commitments to consumer cooperatives (Smillions)
Year
1979
1980
1981 (January)
(February)

Regular
Program
21.5
55.9

365

Capital Advances
(Soft loans)
0.6
6.7

National Endowments for the Arts and Humanities
Agency: National Endowments for the
Arts & Humanities

Functional
Code: 503

Funding
National Endowment for the Arts
CARTER BUDGET:
Budget Authority
Outlays
REESTIMATES AND ADJUSTMENTS:
Budget Authority
Outlays
PROGRAM CHANGES:
Budget Authority
Outlays
REAGAN BUDGET:
Budget Authority
Outlays
National Endowment for the
Humanities
CARTER BUDGET:
Budget Authority
Outlays
REESTIMATES AND ADJUSTMENTS:
Budget Authority
Outlays'
PROGRAM CHANGES:
Budget Authority
Outlays
REAGAN BUDGET:
Budget Authority
Outlays

1981

1982

159
154

175
168

—

Budget Reform
Criterion: 6
($ in millions)
1984
1983

1985

1986

188
175

203
188

217
202

230
212

-13
-7

-28
-21

-42
-36

-55
-49

—

-87
-45

-81
-71

-75
-69

-70
-61

-65
-55

159
159

88
123

94
97

100
98

105
103

110
108

152
155

169
166

179
182

193
195

206
207

219
218

-10
-12

-24
-29

-37
-41

-50
-52

-84
-42

-79
-57

-72
-68

-67
-68

-62
-65

85
124

90
113

97
98

102
98

107
101

152
151

Program Description
The National Endowment for the Arts awards discretionary grants to State and local arts agencies,
cultural institutions, organizations, and individuals. Grants are aimed at: (1) encouraging creative
efforts by artists; (2) enhancing access to the arts; (3) supporting arts institutions; (4) providing
leadership in the arts; and (5) maintaining the artistic heritage of diverse cultural and ethnic groups.
The Endowment supports eighteen programs ranging from Dance and Music to Folk Arts and
Literature, and within these programs, some 120 funding categories.
The National Endowment for the Humanities awards discretionary grants aimed at: (1) promoting
public understanding of the humanities; (2) improving the quality of teaching in the humanities; (3)
strengthening the scholarly foundation for humanistic study; and (4) contributing to the future
well-being of essential institutional and human resources critical to humanistic study. Grants are
awarded to individuals, institutions, and organizations in 33 program areas ranging from fellowships to
support research and translations to interdisciplinary community education projects in science,
technology and human values.

Proposed Change
The Administration proposes to reduce budget authority.for the Arts and Humanities Endowments by
50% effective in 1982.

Rationale
Reductions of this magnitude are premised on the concept that Federal policy for arts and humanities
support must be revamped. In recent years, the Endowments have spread Federal financial support
into an ever-wider range of artistic and cultural endeavor. This action will place more emphasis on
the role of private philanthropy and State and local support for arts and cultural activities.

366

Moreover, in view of the current economic crisis requiring reductions in programs critical for
support, funding for artistic and cultural pursuits is a relatively low priority budget item. Given
need for reductions across the full range of Federal programs that meet more basic human needs,
priority items must bear a greater burden if fiscal restraint is to be achieved in a balanced
compassion way.

Key Facts About the Program
Budget by Funding Category
(BA $ in millions)
1981
National Endowment for the Arts
Definite program funds
Administration
Challenge grants
Treasury funds

113.9
11.9*
13.4
19.3
158.5

National Endowment for the Humanities
Definite program funds
Administration
Challenge grants
Treasury funds

106.5
11.2
24.0
JL5
151.2
•Does not include pay suplemental request of $235,000.

National Endowment for the Arts Programs
Artists-in-Schools
Dance
Design Arts
Expansion Arts
Fellows
Folk Arts
Inter-Arts
International
Literature
Media Arts
Museums
Music
Opera-Musical Theater
Research
Special Constituencies
State Arts Agencies
Theater
Visual Arts
Challenge
National Endowment for the Humanities Programs
Public Programs
Humanities Projects in media
Humanities projects in museums and historical organizations
Humanities projects in libraries
Education Programs
Elementary and secondary education
Higher education/regional and national grants
Higher education/individual institutions:
Consultant grants
Pilot grants
Implementation grants

367

1982
Jan. Budget

1982
Revised

127.0
13.6
15.9
18.5
175.0

57.8
12.7
2.5
15.0
88.0

117.7
12.7
27.0
12.0
169.4

59.0
11.0
9.6
5.4
85.0

life
the
low
and

Fellowships and Seminars Programs
National Endowment for the Humanities Fellowships
Fellowships for independent study and research
Fellowships for college teachers
Residential fellowships for college teachers
Summer stipends
Summer seminars for college teachers
Fellowships at centers for advanced study
Fellowships and seminars for the professions
Research Programs
General research
Basic research
Intercultural research programs
State, local, and regional studies
Research, local, and regional studies
Research materials
Research tools program
Program for editions
Translations program
Publications program
Research resources
Organization and improvement projects
Conservation and preservation projects
State Programs
Special Programs and Planning
Youth programs
Science, technology, and human values
Program development
Special projects
Planning and assessment studies

368

National Science Foundation Programs
Agency: National Science
Foundation

Functional
Code: 251

Funding
1981
CARTER BUDGET:
Budget Authority
Outlays
REESTIMATES & ADJUSTMENTS:
Budget Authority
Outlays
PROGRAM CHANGES
Budget Authority
Outlays
REAGAN BUDGET:
Budget Authority
Outlays

1,083
1,007

1982
1,358
1,190

Budget Reform
Criterion: 6
(S in millions)
1984
1983

1985

1986

1,471
1,324

1,584
1,441

1,694
1,558

1,799
1,673

-14
-12

-37
-33

-62
-57

-85
-65

-83
-36

-320
-209

-346
-312

-369
-336

-392
-360

-411
-397

1,000
971

1.038
981

1,111
1,000

1,178
1,072

1,240
1,141

1,303
1,211

Program Description
NSF provides support for research (particularly basic research) in all scientific disciplines, and for
science and engineering education. The 1982 Carter Budget represented an increase of 25% over 1981
appropriated levels — one of the largest annual increases for NSF in the last two decades.

Proposed Change
NSF programs would be reduced in 1981 by $83 million or 8% below the appropriated level and in
1982 by $320 million or 24% below the Carter Budget. These reductions are made possible through:
•

deferral of the new programs proposed in the Carter budget;

•

elimination in 1982 of support for separate programs in science education;

•

reduction of behavioral, social, and economic sciences; and

•

reduction of funding for separately identified industry and international science activities.

The revised budget would largely protect the core programs of the Foundation for the support of
research in the mathematical, physical, biological, and neural sciences; in the earth, ocean, atmospheric
and astronomical sciences; and in engineering. Certain relatively narrowly focused activities in
research would be reduced or eliminated. The Antarctic research program, which maintains a U.S.
presence in that region, and the ocean drilling programs, conducted with joint industry and
international funding would continue essentially as planned.

Rationale
The 1982 Carter Budget increase of 25% over 1981 for NSF clearly cannot be sustained in the current
environment of severe fiscal restraint.
•

New Programs proposed in the Carter 1982 Budget, totalling $110 million and including the
university scientific laboratory and instrumentation upgrading program and the 25 meter
radio telescope, can be dererred for future consideration.
The objectives of the
instrumentation modernization program can be partially met through the Foundation's
research project support.

•

Separate programs in science and engineering education are being phased out because:

— funds saved are necessary to achieve an overall reduction in the Foundation without
sacrificing support of basic research in the natural sciences which is a relatively more
appropriate responsibility of the NSF and Federal Government;
— NSF support for science education has been spread among a large number of small
programs which have little potential to impact significantly the problems they have
addressed; hence their elimination would have a relatively small adverse impact; and

369

—Despite the eventual elimination of the fellowship and traineeship element of the science
education program, the Foundation will continue to support over 9,000 graduate
research assistants and postdoctoral fellows through its regular research project support
grants.
•

Support for the behavioral social and economic sciences is being reduced significantly
because much of the support of these sciences is considered of relatively lesser importance to
the economy than support of the natural sciences. With $21 million left in the NSF budget
for the behavioral, social and economic sciences, support can still be provided for critical
high priority research .

•

Other changes in the support of science would eliminate or reduce separately identified
funding for several narrowly focused programs cross - doctorate programs at NSF. Examples
include: (1) Women-in-Science program which is less important now in view of significant
improvements in the participation of women in the scientific workforce. (2) Two-to-four year
college research instrumentation grants for which separately identified funding should not be
provided because high quality research in any academic institution is eligible for funding
through NSF research programs. (3) An experimental program to stimulate "competitive"
research which is inappropriate for continued funding because it channels funds away from
support of the best possible research solely for the purpose of ensuring greater geographic
uniformity in distribution of research funds.

•

Although separately identified industry and international science programs are being
reduced, highly meritorious activities can continue to be supported with the funds remaining
or in competition with projects funded through regular research grants.

Key Facts About the Program
•

The revised budget, for 1982 will still provide an increase of $38 million in budget authority
over 1981.

•

The revised budget of $1,038 billion represents an increase of more than $100 million over
the past three years (since 1979).

•

The revised budget wall still permit a 15% increase over 1981 in support of research in the
natural sciences and engineering.
Support for such research is the highest priority
responsibility of the Foundation because — along with other Federal long-term research —it
provides the underpinning for future growth in the economy and leadership in science and
engineering.

•

Although science education programs are being eliminated, sufficient funds are provided in
the 1982 budget for science education to continue support for persons on previously awarded
multi-year fellowships.

370

Annual Indexation of Civil Service Retirement Annuities
Agency: Office of Personnel
Management

Functional
Code: 602

Funding
1981
CARTER BUDGET:
Budget Authority
Outlays
REESTEVIATES & ADJUSTMENTS:
Budget Authority
Outlays
PROGRAM CHANGES:
Budget Authority
Outlays
REAGAN BUDGET:
Budget Authority
Outlays

1982

Budget Reform
Criterion: 1
(S in millions)
1984
1983

1985

1986

27,634
17,633

29,597
19,926

32,008
22,667

34,139
25,248

36,010
27,774

37,704
30,207

+ 24
-77

-47
-253

-167
-597

-382
-1,031

-535
-1,547

-762
-2,158

27,658
17,556

29;550
19,673

31,841
22,070

33,757
24,217

35,475
26,227

36,942
28,049

Program Description
1.6 million civil service retirees and survivors receive annuities that are fully adjusted for inflation
twice a year (in March and September). The amount of the increases is determined by the increase in
the Consumer Price Index (CPI).

Proposed Change
The Administration has proposed that Federal annuities be adjusted annually. The adjustment would
be made in March of each year on the basis of the annual increase in the'CPI. Under this proposal,
no September adjustments would be made (the September, 1981 adjustment would be the first one to
be eliminated).

Rationale
This proposal is part of the Administration's effort to revise entitlements to eliminate unintended
benefits.
Virtually no group is as well protected against inflation as Federal retirees. Full automatic indexation
of annuities is an extraordinary benefit in and of itself. Full semi-annual adjustments are almost
without parallel in any other sector of the economy.
Social Security pensions are only adjusted once a year. Typically, individuals with both private
pension plans and social security have protection of up to 70% of the CPI. These 70% adjustments
are not more frequent than once a year. The President's Commission on Pension Policy found that
one-half of State and local pensions are adjusted for inflation but with specified limits, generally 3%
annually. Less than 5% of all State and local employees are covered by plans that provide for
unlimited automatic adjustment.
Ironically, the generous adjustments for retired Federal Government employees are not only
inequitable in terms of the retired population mentioned above, but also produce inequities between
Federal retirees within the same system. Older retirees often receive greater benefits than recent
retirees with comparable positions and length of Federal service. For example, a GS-5 typist retiring
in 1965 at age 62 with 30 years of Federal service would currently receive an annual annuity of over
$11,000, while a similar employee retiring last summer would receive less than $8,000 annually.

Key Facts About the Program
Evidence of the overwhelming generosity of Federal employee retirement systems demands that its
recipients be asked to take their share in the reductions in government expenditures. The reduction is
not drastic. The March CPI adjustment each year will produce an annuity rate that is the same as that
produced under a twice-a-year system. The difference is that the annuity paid under once-a-year is
less than twice-a-year for 6 months of the year (i.e^ October through March). The following is a
tabular illustration of the effect of the proposal on the rate of annuity paid.

371

COST OF LIVING ADJUSTMENTS
CPI Adjustment
March 1981
Sept. 1981
March 1982
Sept. 1982
March 1983

Current Process
% CPI
Monthly Annuity
$ 958 17
5.8
1,014
4.1
1,056
4.3
1,101
2.6
1,130

Proposed Process
%
% CPI
Monthly Annuity
$ 958 17
10.2

1,056

1,130

The total annual loss to an annuitant paid at a rate of $958 monthly is $336 a year. As the table
indicates, this is a one-time loss and is not compounded in succeeding years.
In return, the estimated savings in 1982 to the CSR fund, if annual COLA is adopted, is $510M.
Further, a highly inequitable policy will be discontinued. Under current policy and our proposed
changes, virtually every Federal beneficiary group receiving assistance with automatic adjustments for
the impact of inflation will have their payments adjusted annually including the military, social
security, workmen's compensation, food stamps, and child nutrition.
^ Average annuity paid to Federal employee beneficiaries on the Civil Service retirement rolls.

372

Intergovernmental Personnel Act Grant Program
Agency: Office of Personnel
Management

Functional
Code: 806

Funding
CARTER BUDGET:
Budget Authority
Outlays
REESTIMATES & ADJUSTMENTS:
Budget Authority
Outlays
PROGRAM CHANGES:
Budget Authority
Outlays
REAGAN BUDGET:
Budget AuthorityOutlays

Budget Reform
Criterion: 6

1981

1982

(% in millions)
1984
1983

1985

1986

20.0
20.5

20.0
21.5

20.0
20.0

-5.6
-2.0

-20.0
-12.9

-20.0
-20.0

14.4
18.5

8.6

Program Description
At the projected level of $20 million, The Office of Personnel Management would allocate $16M in
grant funds to State and local governments, on a 50-50 matching formula, for personnel management
projects, including labor relations, staffing, and training. An additional $4M would be allocated to
discretionary demonstration and intergovernmental activities.
' A total of 800 projects is
planned—roughly $25 thousand in Federal funds per project.

Proposed Change
The Administration does not propose to seek further funding of this categorical grant program. The
change would also eliminate the need for extensive pre-award consultation, processing of grant
applications, and monitoring implementation.

Rationale
The elimination of the Intergovernmental Personnel Act Grant (IPA) program is proposed because of
the strong conviction that personnel activities and improvements in the area of merit staffing, training,
compensation, and labor relations are the direct responsibility of State and local governments and
should be funded by them.
Insofar as the Federal Government has aggravated the problems of State and locals in carrying out
their personnel responsibilities through the heavy demands placed on them to manage a multiplicity
of grant programs, the Administration has developed a far better solution than continuance of IPA.
That solution is to remove those demands by eliminating many catagorical grants and consolidating
them into four block grant programs.

Key Facts About the Program
The Federal Government has funded, on a matching-fund basis, some 5,000 personnel management
improvement and training projects over a 10-year period at a cost of about $160 million.
The primary purpose of the Federal Government's involvement was to demonstrate, through the
provision of "seed-money" to fund a series of projects, the value to State and local governments of
investing their own resources in efforts to build or improve merit-based personnel systems. Implicit
in this concept was the expectation that the program would end after a reasonable period. The
Administration believes that a 10-year demonstration period is more than adequate and that it is now
appropriate to eliminate direct Federal involvement.
Finally, the proposal eliminates the need for a Federal bureaucracy to distribute and monitor the
awards and for the inevitable Federal presence and control that follow this process.

373

Postal Service Subsidy Reduction
Agency: United States
Postal Service

Functional
Code: 372

Funding
1981
CARTER BUDGET:
Budget Authority
Outlays
PROGRAM CHANGES 1/:
Budget Authority
Outlays
REAGAN BUDGET:
Budget Authority
Outlays

1,343
1,343

1982

Budget Reform
Criterion: 4
($ in millions)
1983
1984

1985

1986

1.119
1,119

831
831

789
789

764
764

754
754

-250
-250

-112
-112

-237
-237

-226
-226

-216
-216

869
869

719
719

552
552

538
538

i related proposal. Total savings from current law under this proposal are
follows:
Budget Authority
Outlays

1981
-250
-250

1982
-632
-632

1983
-690
-690

1984
-765
-765

1985
-779
-779

1986
-779
-779

Program Description
This proposed reduction would affect the public sendee subsidy and the revenue forgone payments to
the Postal Sendee. The public sendee subsidy offsets the costs of maintaining services that are not
self-sustaining. The revenue forgone subsidy provides funds for reduced rates for certain classes of
mail.

Proposed Changes
Under this proposal the public sendee subsidy will be phased out by 1984. The revenue forgone
subsidy will be reduced to $500 million in F T 1982 and beyond. These reductions should result in
the Postal Service taking action to further increase the productivity and cost-effectiveness of postal
operations.

Rationale
In applying sound economic criteria to subsidy programs, the Administration believes that the costs of
mail sendee should be borne by its users, not taxpayers. Subsidies to the Postal Service undercut its
incentives to realize operational efficiences, hindering its progress towards financial independence.
Further, articifially suppressed mail rates encourage inefficient use of the mail system and have the
effect of increasing postage rates. The Administration believes that the Postal Service, if it is to
become a viable business concern, must live within its operating revenues.

Key Facts About the Program
•

Even with the proposed reductions, certain mailers will continue to receive subsidies which
will make up the difference between the rate they actually pay and the regular rate charged
to non-subsidized mailers.

•

The nonprofit rate is now subsidized to such an extent that bulk mailers have little incentive
to update their mailing lists, preferring instead to mail duplicates.

•

Revenue forgone subsidies represent less than 0.2 precent of the net non-profit income
reported by non-profit organizations. These organizations are estimated to receive almost
$12 billion in Federal grants and other benefits in 1980, exclusive of mailing subsidies which
were $643 million.

374

Savings of the proposed reductions from current law are shown in the following table:
(Outlays in millions of dollars)
1982
1983
1984
1985
1981
Public Service Subsidy:
644
552
Current law
736
789
764
Reagan level
486
300
150
0
0
Revenue Forgone Subsidy:
Current law
789
789
789
789
789
Reagan level
789
500
500
500
500
Total savings from current
law:
250
632
690
779
765

375

1986
754
0
789
500
779

Railroad Retirement
Agency: Railroad
Retirement Board

Functional
Code: 601

Funding
1981

1982

Budget Reform
Criterion: 1,2,6
($ in millions)
1983
1984

1985
1986
CARTER BUDGET:
Outlays
5,295
5,827
6,664
6,285
7,007
7,351
REESTEVIATES & ADJUSTMENT:
+41
-61
-186
-301
-432
-575
Outlays
PROGRAM CHANGES 17 :
-10
-40
-40
-40
-40
-40
Outlays
REAGAN BUDGET:
5,326
5,726
6,059
6,323
6,535
6,736
Outlays
17
The Carter Budget already included savings for another proposal the Rail Pension Assurance Amendments which has been
adopted in the Reagan revisions. Pension Assurance increased trust fund receipts (BA) and reduced outlays, as follows:
1981
1982
1983
1984
1985
1986
Budget Authority
-+340
+ 372
+ 396
+ 424
439
Outlays
^z
=40
z80
zl20
zl59
^195
Total Deficit Reduction
- (380)
(452)
(516)
(583)
(634)

Program Description
The federally administered rail industry plan pays pensions to 1 million retired or disabled rail
workers, their dependents and survivors. The rail sector has not adequately funded their existing
industry pension plan which is insolvent and will be out of funds by April 1982. The rail industry
pension plan is actuarially underfunded by at least 4 percent of industry payroll in the long term.
Based on the rail sector's commitment to report their joint recommendation for sound financing of
existing as well as higher pensions by March 1, 1981, the Congress enacted in December 1980 an ad
hoc increase to take effect three months after the report (June 1981). The parties have missed their
deadline, and a negotiated agreement for sound industry financing is unlikely to emerge in the near
future.

Proposed Changes
To avoid exacerbating the rail plan's insolvency, repeal the increase and enact the Rail Pension
Assurance Amendments until the rail sector soundly finances their pensions.

Rationale
Since 1976 RRB's Chief Actuary has projected serious underfunding of the rail industry pension. Rail
labor and management have yet to agree on financing of their industry pension, a responsibility they
have to the 1 million beneficiaries and 500,000 rail workers. The Nation's taxpayers now annually
subsidize the rail industry pension by $700 per rail worker.
Benefits should not be increased when the rail industry pension will be bankrupt in a year. The rail
sector should soundly fund existing pensions before increasing payments. The Rail Pension Assurance
Amendments would increase revenues by one-half the actuarial deficit and prospectively reduce
payments by the other half.

Key Facts About the Program
•

Rail earnings will average over $29,800 in 1982, placing rail employees among the highest
paid workers in America.

•

Rail pensions are among the richest multi-employer pensions. Railroaders' pensions exceed
Federal Civil Service or Military Retirement payments for comparable earnings, according to
GAO (HRD 79-41, June 8, 1979).

376

•

Federal taxpayers directly subsidize the rail industry pension plan by $350 million annually.
This current taxpayer subsidy equals $700 per rail employee. The rail industry seeks to
double this windfall subsidy.

•

Social Security, in a unique arrangement, annually contributes $1.9 billion to the rail
industry pension plan. The rail industry seeks to transfer an added $2 billion out from social
security into their pension plan.

377

SBA Business Credit Assistance
Agency: Small Business
Administration

Funding
1981
CARTER BUDGET:
Budget Authority
Outlays
REESTLMATES & ADJUSTMENTS:
Budget Authority
Outlays
PROGRAM CHANGES 17 :
Budget Authority
Outlays
REAGAN BUDGET:
Budget Authority
Outlays
17

Budget Reform
Criterion: 4

Functional
Code: 376
1982

($ in millions)
1984
1983

1985

1986

619
572

546
614

624
709

674
752

690
768

699
777

0
-49

-149
-81

-22
-197

-60
-226

-75
-240

-82
-248

619
524

397
534

602
513

614
527

615
529

617
530

1985
-191
-356

1986
-203
-369

The Carter Budget already included savings for this proposal. Total savings
1982
1981
0
-289
Budget Authority
-96
-160
Outlays

expected are as follows:
1984
1983
-120
-170
-295
-336

Program Description
The Small Business Administration (SBA) provides credit assistance to small businesses through its:
•

direct and guaranteed business loan programs;

•

100% guarantee of State pollution control bonds, the proceeds of which are used to enable
small businesses to acquire pollution control equipment; and

•

90% guarantee of losses incurred by surety companies on bid, payment, or performance
bonds that are issued to small contractors.

The Carter 1982 Budget proposed to consolidate SBA's business loan programs and to raise the
subsidized interest rates on direct loans to the rate charged for guaranteed loans. The Carter Budget
also proposed to reduce the 1981 program levels approved by the Congress for both direct and
guaranteed business loans:
(Program level in millions of dollars)
1981
1982
Carter
Reagan
Carter
Reagan
Budget
Budget
Budget
Budget

Cong.
Action
Business Loans:
Direct
Guaranteed

404
4,518

346
4,168

304
3,888

346
4,200

260
3,150

The Carter Budget proposed no changes in 1981 or 1982 from the 1980 program level ($1.6 billion)
for surety bond guarantees. It did, however, propose a modest increase in the program level for
pollution control bond guarantees, requesting that die ceiling be raised from $100 million in 1980 to
$110 million in 1981, and then to $125 million in 1982 (i.e., the statutory authorization ceilings).

Proposed Change
•

Reduce all credit assistance program levels by 25% in 1982. (In 1981, reduce uncommitted
resources proportionately).

•

Eliminate deep interest subsidies on direct loans by increasing interest rates to the market
level charged for guaranteed loans, i.e., within no more than 2 3/4 percentage points above
New York prime.

378

Ending deep interest subsidies would eliminate the artificial demand for direct loans and would
facilitate efforts to make SBA the lender of last resort. It is anticipated that private lenders will
provide sufficient resources to mitigate the effect of reductions in SBA lending and other credit
assistance activities. This will be facilitated by the President's proposed tax, fiscal, and regulatory
reduction measures, which are designed to stimulate economic expansion and job creation.

Rationale
•

The proposed changes are an integral component of the President's plan to apply sound
criteria to economic subsidy programs.

•

Small business will benefit substantially more from the President's overall economic plan to
stabilize financial markets, reduce interest rates, and get inflation down than from SBA
financial assistance.

•

Increasing interest rates would reduce the number of marginal small businesses that are
unable to compete in the marketplace and are dependent on Federal subsidies to survive. It
would also minimize distortions in the credit market, as well as productivity losses.

•

It has not been demonstrated that the private sector will not absorb significant portions of
SBA financial assistance to small business.

•

The proposed changes are part of a comprehensive plan to restructure SBA credit assistance
activities, with the ultimate objective of reducing the Government's level of intervention.

Key Facts About the Program
•

Even after the reductions, 1981 and 1982 guaranteed loan program levels do not represent a
significant decline below the actual 1980 level. In 1980, $3,176 million in new guaranteed loan
commitments were made.
The Reagan Budget provides for new guaranteed loan
commitments of $3,388 million and $3,150 million in 1981 and 1982, respectively.

•

In 1980, SBA made a total of 31,519 direct and guaranteed loans. As of January 31,1981, SBA
had a total of 137,500 direct and guaranteed loans outstanding. This means that SBA is
providing financial assistance to less than 2% of the 14 million small businesses identified by
IRS.

•

The Pollution Control Bond Guarantee program provides an indirect guarantee of
tax-exempt revenue bonds and, therefore, operates in violation of Administration credit
policy.

•

SBA's management of the Surety Bond Guarantee program has been criticized by GAO (in
a 12/27/79 report) for not taking adequate steps to minimize losses and to ensure that small
businesses are able eventually to obtain bonds without Federal guarantees.

379

SBA Disaster Loan Assistance
Agency: Small Business
x\dministration

Functional
Code: 453

Budget Reform
Criterion: 4

Funding
1982

(S in millions)
1984
1983

1,480
2,300

0
-99

0
-100

-780
-780

0
8

0
-2

0
11

0
24

0
36

700
1,520

0
-91

0
-102

0
-89

0
-76

0
-63

1981
CARTER BUDGET:
Budget Authority
Outlays
REESTEVIATES & ADJUSTMENTS:
Budget Authority
Outlays
PROGRAM CHANGES:
Budget Authority
Outlays
REAGAN BUDGET:
Budget Authority
Outlays

1985

1986

Program Description
The Small Business Administration (SBA) provides heavily subsidized loans to individuals and
businesses that are victims of physical and non-physical disasters. These loans are funded through a
combination of budget authority and repayments on outstanding loans. The negative outlays shown
above represent repayments in excess of program needs.
•

Physical Disaster Loans. Loans to rehabilitate or replace damaged property are provided at
interest rates of:
— 3% for homeowners,
— 5% for business that cannot obtain credit elsewhere, and
— at the current cost of Treasury borrowing for businesses that can obtain credit elsewhere

These loans are authorized in areas where the President, the Secretary of Agriculture, or the
Administrator of SBA declares a disaster resulting from a natural catastrophe. Loans may also be
awarded to small businesses located in a disaster area to mitigate the economic effects of the disaster.
•

Non Physical Disaster Loans. These loans are provided only to small businesses that suffer
economic injury as a consequence of government regulatory or legislative action (e.g., air and
water pollution standards, standards for occupational safety and health, involuntary
dislocation, and U.S. Olympic boycott).

Legislation (P.L. 96-302) enacted in July 1980 has, with very few exceptions, ended the availability of
SBA disaster assistance to farmers. To reflect this change, the Carter Budget proposed a 1982 disaster
loan program level of $490 million, as compared to a 1981 level of $2,850 million, which included
assistance to farmers that suffered losses from droughts that began before the new law was enacted.

Proposed Change
•

Withdraw 1981 supplemental request and adopt policies that will ensure that the Disaster
Loan Fund operates within existing budgetary resources (i.e., a 1981 program level of $2.1
billion).

•

Terminate funding for non-physical disaster assistance. In 1981, the $10 million originally
provided for this purpose during the second half of the year will be used to meet the need
for physical disaster assistance. The request for $50 million in 1982 is being withdrawn.

•

Raise interest rates on physical disaster loans to the current cost of Treasury borrowing,
thereby limiting interest subsidies.

•

Limit disaster assistance loans to victims who have no sources of private financial asssistance.

The major reductions identified should not significantly affect disaster victims who are most deserving
of assistance. SBA has developed new disaster loan allocation policies that take into account the need
to establish priorities among eligible disaster victims and ensure that all deserving victims receive some
aid.

380

Rationale
•

The proposed changes are consistent with the President's policy of applying sound criteria to
economic subsidy programs.

•

An increase in interest rates would eliminate the incentive to apply for disaster loans when
no real need exists and would still provide substantial savings to disaster victims over
prevailing market rates.

•

The open-ended availability of Federal disaster assistance is a disincentive for individuals
and businesses to make sound locational decisions.

•

Since there is no attempt to target assistance to those in most need, the Government
ultimately subsidizes the rich as well as the poor.

•

According to a 1979 GAO Report, there is little or no assurance that "disaster assistance
loans are not used in frivolous ways, particularly by wealthier borrowers." A January 1981
GAO Report on Federal aid in Massachusetts after the 1978 blizzard indicated that there was
evidence of misuse or duplication of disaster benefits in 26% of the sample cases audited.

•

Many of the "non-physical" disaster loans are necessitated by poor business judgment To
the extent that financial assistance is justified, it can be provided through SBA's regular
business loan program.

Key Facts About the Program
•

SBA's disaster loan portfolio has increased from $563 million in 1971 to $5.4 billion in 1980.

•

If no constraints were imposed, SBA estimates that the demand for 1981 disaster assistance
would exceed $4.9 billion.

•

Until regulations were revised on March 19, 1981, SBA provided loans to disaster victims
without regard to the availability of private financing or personal net worth.

•

Under its revised regulations, SBA will impose a means test and a credit elsewhere test and
will limit business disaster loans to 60% of verified physical losses. Homeowners will continue
to receive 100% of verified physical losses.

381

Summary of Small SBA Items
Agency: Small Business
x\dministration

Functional
Code: 376

Funding
CARTER BUDGET:
Budget Authority
Outlays
REESTEVIATES & ADJUSTMENTS:
Budget Authority
Outlays
PROGRAM CHANGES:
Budget Authority
Outlays
REAGAN BUDGET:
Budget Authority
Outlays

Budget Reform
Criterion: 6
(% in millions)
1984
1983

1981

1982

45
45

48
48

-4
-8

-20
-16

-16
-16

41
37

28
32

32
32

1985

1986

Program Description
The Small Business Administration (SBA) funds several special purpose management and technical
assistance programs, including:
•

The Small Business Development Center (SBDC) program, which provides a.
university-centered approach to the delivery of management assistance to small businesses
($5.4 million in 1982).

•

The Women's Business Enterprise (WBE) program, which targets'management and technical
assistance to women business owners ($6.4 million in 1982).

•

The 7(j) Development Assistance program (sometimes referred to as "call contracting"),
which provides technical and management assistance—through private contractors—to firms
determined by SBA to be socially and economically disadvantaged ($12 million in 1982).

•

The Business Development Expenses (BDE) program, which provides funds to socially and
economically disadvantaged firms participating in SBA's 8(a) procurement program to
purchase equipment and/or materials needed to perform a Government contract ($24 million
in 1982).

Proposed Change
•

Terminate funding ($5.4 million) for the Small Business Development Center program
beginning in 1982.

•

Eliminate separate funding for all Women's Business Enterprise activities that can be
performed through on-going SBA programs (i.e., reduce WBE by $2.2 million in 1981 and
$4.8 million in 1982).

•

Eliminate Carter Budget enhancements of $2 million in 1981 and 1982 for 7(j) Development
Assistance.

•

Eliminate Carter Budget increases of $4 million in 1981 and 1982 for Business Development
Expenses for 8(a) firms.

The proposed changes would not have a significant adverse effect on SBA clientele. Assistance to
special interest groups will be provided through on-going SBA mainstream programs. The SBDC
program is a pilot project; therefore, its termination will have minimal effects on the small business
community at large. Similarly, elimination of planned enhancements for minority business assistance
will not reduce benefits below those currently received.

382

Rationale
•

These changes are consistent with President Reagan's efforts to impose fiscal restraint on
programs of national interest

•

The President's comprehensive economic recovery program of tax, fiscal, and regulatory
reduction measures will do more to stimulate small business development than SBA direct
spending programs.

•

The SBDC program creates a major budget threat as requests increase for Centers in each
State. Early evaluations of the program (by GAO and by an outside consultant) cited serious
deficiencies in the delivery of management assistance through this program, including
inadequate faculty participation, insufficient follow-up with clients, and limited minority
outreach efforts. There is also evidence that the program may benefit universities more than
small businesses.

•

The elimination- of a separate Women's Business Enterprise program does not eliminate
SBA's mandate to provide technical and management assistance to women business owners
through its on-going programs. A small staff will be maintained to ensure that adequate
assistance is being provided to women and to develop alternative ways of addressing
women's needs through on-going programs.

•

Given efforts to constrain Federal spending, funding for the delivery of technical and
management assistance to socially and economically disadvantaged businesses must be held
constant. The effects of this reduction are mitigated by the fact that SBA's efforts in this
area are supplemented by the Minority Business Development Agency in the Department of
Commerce.

383

Student Loan Marketing Association (SLMA)
Agency: Student Loan
Marketing Association

Functional
Code: 506

Funding
1981
CARTER BUDGET:
Budget Authority
Outlays
REESTIMATES & ADJUSTMENTS:
Budget Authority
Outlays
PROGRAM CHANGES
Budget Authority
Outlays
REAGAN BUDGET:
Budget Authority
Outlays

1,095
1,095
1,000
1,000

1982
1,923
1,923

—

-1,423
-1,423
2,095
2,095

Budget Reform
Criterion: 6
(S in millions)
1984
1983

1985

1986

2,500
2,500

3,000
3,000

3,500
3,500

4,000
4,000

-289
-289

-457
-457

-957
-957

-1,457
-1,457

-2,211
-2,211

-2,543
-2,543

-2.543
-2,543

500
500

Program Description
SLMA was set up by Congress as a private corporation to provide a secondary market for the
Guaranteed Student Loan (GSL) program. SLMA buys these loans using the Department of the
Teasury's Federal Financing Bank (FFB) capital provided under a Department of Education
guarantee. SLMA has effectively increased the total volume of loans under the GSL program above
what would be lent without a secondary market.

Proposed Changes
The Administration proposes to eliminate the Department of Education's guarantee of SLMA's FFB
borrowing, and therefore deny SLMA's access to the FFB. Off-budget savings will occur due to a
reduction of an estimated $14 billion of FFB lending over the next five years.

Rationale
This proposal is a component of the Administation's effort to impose fiscal constraint on Government
lending and reduce intervention into private capital markets. Further government stimulation of
SLMA is unnecessary. Outstanding GSL commitments are scheduled to double in 1982 over the level
prevailing as recently as 1980, rising to about $30 billion in outstanding commitments by the end of
1982. Some of the 49 State guarantee agencies now provide secondary markets for student loans, and
there are other incentives within the GSL program to generate private loan capital. Given this
resource base in support of student loans, it is unnecessary for the Federal Government to provide
SLMA with subsidized capital to expand its secondary market operations. Although this proposal has
no on-budget outlay impact, it will reduce the Federal presence in the Nation's private credit markets
by reducing the borrowing requirements of the off-budget Federal Financing Bank. SLMA can
access the private market.

Key Facts About the Program
•

As of September 1980, SLMA had $1,168,089 thousand outstanding in warehousing
advances. It is expected that volume will reach an adjusted level of $1,327,900 thousand by
September 30, 1981. SLMA expects to purchase $916,092 thousand in loans in 1981, and
have a net increase of $1,017,500 thousand in 1982, to reach a level of $3,044,000 thousand
as of September 30, 1982.

"•

As of September 30, 1980, SLMA had entered into agreements to purchase during the next
204 months up to $665 million of federally and State insured student loans originated by 11
State higher education agencies and 8 financial institutions. As of September 30, 1981,
SLMA expects to have outstanding $890 million of such agreements to purchase.

•

As of September 30, 1980, SLMA had total outstanding debt obligations to the Federal
Financing Bank of $2,345 million.

384

•

SLMA will be precluded from receiving a double Federal subsidy — the subsidized interest
rates on Guaranteed Student Loans based returning a fair profit over the cost of private
money and the subsidy of using below private market rate Federal financing. This insures
SLMA of large profits on its operation. In 1980 SLMA recorded record profits of $9.4
million, a 50 percent increase over 1979 profits. Earnings per share jumped from $38.80 in
1979 to $56.64 in 1980.

•

The Federal borrowing is only one of the many means SLMA has available for raising
capital.
•

The Education Amendment of 1980 removes SLMA's access to the FFB after 1984, the
Administration's proposal would implement this change two years earlier. This would force
SLMA to seek private funds to support its operation, something SLMA has always said it
wants to do when it is ready.

•

The 3/2/81 Chronical of Higher Education quoted Ed Fox, President of SLMA as saying
that "the corporation is ready to continue its services to private lenders if allowed a gradual
shift from government financing of its operations."

•

The Administration's proposal will permit SLMA to borrow an additional $1.5 billion from
the FFB between 1981 and 1982 in order to ease the effects of a sudden loss of Federal
support for current long term commitments and ease the transition to financing through the
private market.

•

SLMA's Federal guarantee was intended to be a temporary feature of its operation until it
became established in financial markers. When the FFB was created in 1974, SLMA became
an eligible borrower because of the Federal guarantee of its debt. Since that time, it has
borrowed exclusively from the FFB and has not sought financing through private markets.

344-211 0 - 8 1 - 1 3

385

Savings Affecting Many Agencies

387

Savings Due to Reduction in Regulations
Agency: Regulatory
Reform

Functional
Code: 999

Budget Reform
Criterion: NA

President Reagan has initiated a comprehensive progam to eliminate unnecessary governmental
interference in the economic and private lives of all Americans. While some regulatory activity is
needed to protect the health and safety of the public — few would suggest eliminating traffic signals
- every regulation costs the taxpayer in two ways. There are the direct costs associated with
maintaining the bureaucracies that issue, administer, and enforce regulations. The administration's
proposal will reduce these costs by more than $100 million in 1981 and $500 million in 1982. These
savings are included in other savings shown elsewhere. The other costs that regulations place on the
public are higher prices and government interference in their everyday lives. These costs are discussed
elsewhere in the President's message.
The budget impact of several major reductions in regulation proposed by the administration is
discussed below.
•

Decontrol of oil prices will encourage the development of our petroleum resources and also
reduce the direct cost to the taxpayer of government regulation by $50 million in 1982.

•

Elimination of the Council on Wage and Price Stability will save the taxpayer $1.5 million in
1981 alone.

•

Elimination of unnecessary governmental controls on the delivery of health care will save
approximately $200 million in 1982. The Administration proposes to eliminate the
burdensome bureaucracies of health planning agencies and professional standards review
organizations.

In addition to these specific reductions, these figures include some across-the-board cuts in the
budgets of regulatory agencies. Fewer regulators will necessarily result in fewer regulations and less
harassment of the regulated.

Savings Due to Reductions in Federal Regulatory programs^
(dollar amounts in millions)
Regulatory
Activity

Employment*

1982
BA

Business and commerce

438

768

Environment and energy

826

150

107

3,098

355

308

Health care industry and other

212

955

217

172

1,476

229

173

4,821

595

506

TOTAL

1981
Employment*

These savings are included in other savings shown elsewhere.

* Full-time equivalent.

389

Reductions of Federal Civilian Employment and Related Savings
Agency: All
Agencies

Functional
Code: 999
1981

CARTER BUDGET:
Total
Defense
Non-Defense
POTENTIAL CHANGE:
Defense
Non-Defense
REAGAN BUDGET:
Total
Defense
Non-Defense

Budget Reform
Criterion: 8

(Number of employees*thousands)
1982
1984
1983

1985

1986

2,111
(916)
(1,195)

2,132
(916)
(1,216)

14
-33

20
-63

20
-83

14
-102

8
-123

2
-144

2,092
(930)
(1,162)

2,089
(936)
(1,153)

2,069
(936)
(1,133)

2,044
(930)
(1,114)

2,017
(924)
(1,093)

1,990
(918)
(1,072)

PERSONNEL COMPENSATION AND BENEFITS
Budget Authority and Outlavs
(in billions of dollars)

Carter Budget 17
Potential change:
Defense
Non-Defense
Reagan Budget
l/

1981

1982

1983

1984

1985

1986

56.5

58.0

0.1
-0.4
56.2

0.3
-1.6
56.7

0.3
-2.1
56.2

0.2
-2.6
55.6

0.2
-3.1
55.1

0.1
-3.7
54.4

Excluding future pay adjustments

Compensation and benefits for Federal civilian workers comprise a significant part of the Federal
budget—about $56.5 billion for 1981.

Rationale
As a step in reducing the size, cost, and inefficiency of the Government, the President has imposed
new lower civilian personnel ceilings for 1981 and 1982 for Executive Branch agencies. At the same
time, the Government-wide hiring freeze has been lifted for those agencies that are able to meet their
revised lower personnel ceilings. These lower personnel levels will help foster a new attitude toward
eliminating waste and inefficiency in Government and spur increased productivity.
Lower levels of Federal employment are appropriate because of reduced program levels in the revised
Reagan budget In addition, lower Federal employment levels can be achieved by reducing overhead
and by greater efficiencies in carrying out Federal programs.
To meet the Nation's highest priority needs and to assure that essential services are not interrupted,
heads of agencies have been instructed to make reallocations within their respective agencies. This
will result in more efficient use of personnel and funds by targeting limited resources to those
operations that vitally affect the Nation.

Proposed Change
For non-Defnese agencies, civilian employment will be reduced to a level that would have been
achieved if the total freeze on hiring remained in effect throughout 1981. There were some
exceptions to this general statement.
•

The Defense Department's employment will increase in tandem with proposed increases in
budgetary resources for national defense.

•

The Department of Health and Human Services will experience a small, short-term, increase
in staffing to implement social security benefit reforms.

390

•

The Department of State will hold level for 1981 for reasons of national security.

•

The Treasury Department will experience a lesser decline in IRS than would have been
derived from continuing the freeze to provide for increased levels of audit examinations,
which in turn will increase revenues.
The end result will be a reduction in total employment of 32,900 positions from the Carter budget
estimates for 1981. For 1982 there will be a reduction of 63,100 positions from the Carter budget and
for the years of 1983-1986 there will be further reductions each year.
For the non-Defense agencies this will result in savings of about $400 million in 1981 and about
$1,600 million in 1982.
For the Department of Defense, civilian employment will increase from the Carter budget by 14,000
positions in 1981; by 20,000 in 1982 and 1983; and by lesser amounts in later years.

Full-Time Equivalent Employment in the Executive Branch
(Revised 1982 Budget)
Fiscal Year
1980
Full-time permanent..
Other than full-time...
TOTAL

391

1981

1982

1,882.300
245.400

1,868,300
252.100

1,854,100
246.700

2,127,700

2,120,400

2,100,800

Summary of the Full-Time Equivalent of Full-Time Permanent Civilian
Employment in the Executive Branch
(Revised 1982 Budget)!7
Exluding the Postal Service

1980
estimate
85,400
29,300
855,000
27,700
6,400
19,600
136,400
15,600
53,800
53,400
22,100
21,800
68,800
109,400
10,700
22,600
193,100

Agriculture
Commerce
Defense—Military functions
Defense—Civil functions
Education
Health and Human Services
Housing and Urban Development

Transportation
Treasury
Environmental Protection Agency
National Aeronautics and Space Administration
Veterans Administration
Other independent agencies:
General Services Administration
International Communication Agency
International Development Cooperation Agency
Nuclear Regulatory Commission
Office of Personnel Management
Panama Canal Commission
Small Business Administration
Tennessee Valley Authoritv
Miscellaneous
Subtotal
2/

Contingencies
Total

FISCAL YEAR
1981
1982
estimate
estimate
83,800
84,800
32,100
30,900
869,600
878,700
27,800
25,400
6,000
5,800
19,100
17,400
134,900
129,800
15,700
15,200
53,100
52,800
53,600
52,800
21,800
21,000
22,000
21,900
68,000
65,800
107,900
108,000
10,600
10,400
22,000
21,700
194,000
188,900

Change
1981-1982
1,000
-1,200
9,100
-2,400
-200
-1,700
-5,100
-500
-300
-800
-800
-100
-2,200
100
-200
-300
-5,100

32,300
8,000
5,700
2,800
6,400
7,700
4,400
16,500
.42,400

31,600
7,900
5,600
3,200
5,900
8,300
4,500
16,200
42,100

30,100
7,500
5,400
3,300
5,700
8,300
4,300
15,500
41,700

-1,500
-400
-200
100
-200

1,857,300

1,867,300

1,853,100

-14,200

1,857,300

1.000
1,868,300

1.000
1,854,100

-14,200

-200
-700
-400

—

^ Excludes developmental positions under the worker-trainee opportunity program (TOP) as well as certain statutory exemptions.
^ Subject to alter distribution

392

Total Federal Employment, End-of-Year
(Revised 1982 Budget)
Description

1980
Actual

Civilian employment in the executive branch:
Full-time permanent (including lapse)
Other than full-time permanent
Subtotal
Postal Service:
Full-time permanent
Other than full-time
Subtotal
Exempt from ceilings l/
Subtotal, executive branch civilian
employment 2 / ' 3 /
Military personnel on active duty: 4 /
Department of Defense
Department of Transportation (Coast
Guard)
Subtotal, Military personnel
Total, Executive Branch Employment
Legislative and judicial personnel: 5 /
Full-time permanent
Other than full-time permanent
Subtotal, legislative and judicial branches..
GRAND TOTAL.

September 30
1981
Estimate

1982
Estimate

1.866,773
266,963
2,133,736

1,858,900
233,200
2,092,100

1,844,800
243,600
2,088,400

535,050
125,035
660,085
27,530

532,800
127,800
660,600
28,000

527,000
124,300
651,300
28,000

2,821,351

2,780,700

2,767,700

2,050,127

2,075,400

2,119,900

39.375
2,089,502
4,910,853

39,800
2,115,200
4,895,900

39,500
2,159,400
4,927,100

32,690
22,198
54,888
4,965,741

^ Developmental positions under the Worker-Trainee Opportunity Program; disadvantaged summer and part-time workers under
such Office of Personnel Management programs as Summer Aids, Stay-in-School, and Junior Fellowship; and certain statutory
exemptions.
^ Excludes indirect hire foreign nationals working under master labor contracts overseas. Actual employment for 1980 was 74,570.
Such employment for 1981 is estimated to be 84,100.
^ For 1981 and 1982, reflects fractional counting of part-time permanent positions, pursuant to the provisions of P.L. 95-437.
^ Excludes reserve components.
^ 1981 and 1982 estimates are not available for the legislative and judicial branches. Also, excludes members and officers of the
Congress.

393

TOTAL FEDERAL CIVILIAN EMPLOYMENT - EXECUTIVE BRANCH
(Excluding the Postal Service; End-of-Year)

Agriculture
Commerce
Defense—Military functions
Defense—Civil functions
Education
Energy
Health and Human Services.
Housing and Urban Development
Interior
Justice
Labor
State
Transportation
Treasury
Environmental Protection Agency
National Aeronautics and Space
Administration
Veterans Administration
Other.
General Services Administration
International Communication Agency
International Development
Cooperation Agency
Nuclear Regulatory Commission
Office of Personnel Management
Panama Canal Commission
Small Business Administration
Tennessee Valley Authority
Miscellaneous
Subtotal
Contingencies
Expected Lapse
TOTAL

January
Budget
129,200
39,200
916,000
31,900
7,200
21,500
154,500
16,400
77,000
55,900
23,500
23,400
71,800
125,000
14,800

1981
Revised
Budget
125,000
37,300
930,000
31,900
6,800
20,300
160,100
15.500
75,000
54,700
21,900
23,400
68,800
120,900
14,100

23,800
216,700
35,500
8,100
6,100
3,500
7,400
8,700
5,000
49,000
45,900
2,117,000
2,000
-8,000
2,111,000

394

-3,000
-4,100
-700

January
Budget
132,300
43,100
916,000
34,700
6,900
21,700
155,300
16,800
78,700
56,500
23,500
23,700
72,200
128,300
15,500

1982
Revised
Budget
126,000
39,600
936,000
32,100
6,400
18,400
155,500
15,300
74,300
54,100
21,800
23.200
67.500
121.200
13,800

23,300
212,000

-500
-4,700

23,800
217,200

23,200
208,000

33,700
7,700

-1,800
-400

36,200
8,100

33,300
7,700

-2.900
-400

5,900
-200
3,400
-100
—
7,400
8,600
-100
4,700
-300
45,500
-3,500
-2,700
43,200
2,101,100 -15,900
1,000
-1,000
-10.000
-2,000
2,092,100 -18,900

6,100
3,600
8,000
8,600
5,000
48,000
47.700
2,137,500
2,000
-8.000
2,131,500

5,800
3,500
7,400
8,500
4.500
44,000
44.300
2,094,400
1,000
-8.000
2,088,400

-300
-100
-600
-100
-500
-4,000
-3.400
-42,100
-1,000

Change
-4,200
-1,900
14,000
- -

-400
-1,200
5,600
-900
-2,000
- -1,200
-1,600

Change
-6,300
-3,500
20,000
-2,600
-500
-3,300
200
-1,500
-4,400
-2,400
-1,700
-500
-4,700
-7,100
-1,700

-600
9,200

-43,100

Summary of Full-Time Permanent Civilian Employment in the Executive Branch
(Revised 1982 Budget) i 7
(Excluding the Postal Service)
(End-of-Year)

Agriculture
Commerce
Defense—Military functions
Defense—Civil functions
Education
Energy
Health and Human Services
Housing and Urban Development
Interior
Justice
Labor
State
Transportation
Treasury
Environmental Protection Agency
National Aeronautics and Space
Administration
Veterans Administration
Other
General Services Administration
International Communication Agency.
International Development
Cooperation Agency
Nuclear Regulatory Commission
Office of Personnel Management
Panama Canal Commission
Small Business Administration
Tennessee Valley Authority
Miscellaneous
:
Subtotal
Contingencies 2/
Subtotal.
Expected lapse
TOTAL

....

As of September 30

1980
actual

1981
estimate

1982
estimate

1981-82
change

82,528
29,270
867,750
27,730
5,639
19,827
136,364
15,613
53,210
53,444
22,112
22,048
68,924
107,463
10,678

84,300
28,500
879,000
27,600
6,000
18,900
137,900
14,900
53,500
53,000
21,200
22,000
66,300
107,700
10,800

84,900
27,600
885,000
25,400
5,600
17,200
131,200
14,600
52,000
52,300
20,800
21,800
65,200
108,100
10,400

600
-900
6.000
-2.200
-400
-1,700
-6,700
-300
-1,500
-700
-400
-200
-1,100
400
-400

22,613
195,255

21,900
194,400

21,900
192,100

-2,300

32,413
7,997

30,600r
7,500

29,700
7,500

-900

5,614
3,029
6,235
7,673
4,408
16,523
42.413
1,866,773

5,500
3,300
5,900
8,300
4,400
15,500
42,000
1,870,900
1000
1,871,900
-13.000
1.858,900

5,400
3,400
5,700
8,100
4,200
15,100
41.600
1,856,800
1000
1,857,800
-13.000
1,844,800

-100
100
-200
-200
-200
-400
-400
-14,100

1,866,773
—

1,866,773

- Excludes developmental positions under the worker-trainee opportunity program (WTOP) as well as certain
statutory exemptions.
7/

Subject to later distribution.

395

—

-14,100
—

-14,100

Revision of the Federal Pay Comparability Standard
Agency: All Civilian
Agencies

Functional
Code: 921

Funding
1981
CARTER BUDGET:
Budget Authority
Outlays
REESTEVIATES & ADJUSTMENTS:
Budget Authority
Outlays
PROGRAM CHANGES:
Budget Authority>17
Outlay^
REAGAN BUDGET:
Budget Authority
Outlays
^

A1 A f f A r t f A f W
A
T
tV
r
«
«
M
\
/
A Vklir C Art f A UI A AM

1982

Budget Reform
Criterion: 8
(S in millions)
1983
1984

1985

1986

958
920

3,765
3,652

6,252
6,153

8,789
8,687

11,372
11,269

-159
-149

-635
-616

-1,132
-1,161

-1,540
-1,597

-2,022
-2,131

799
771

3,130
3,036

5,120
4,992

7,249
7,090

9,350
9,138

age for full, Government-wide effect

Program Description
Under a system prescribed in law, the President annually adjusts Federal civilian pay rates to keep
them comparable to private sector rates, or he may decide on an alternative increase "because of
national emergency or economic conditions affecting the general welfare."

Proposed Change
The principle of comparability is sound but the way it is implemented needs to be changed by: (1)
considering benefits along with pay in comparability determinations because benefits have become
such a significant part of employee compensation in both the public and private sectors; (2)
considering State and local government pay and benefits along with those of the private sector
because State and local employment has grown to be substantial and many employees do the same
work as their Federal counterparts; (3) setting the comparability standard at 94 percent of
non-Federal pay and benefits in consideration of the attractive features of Federal employment in
comparison with many jobs in the private sector; (4) revising other features of the system to bring
them more closely in line with those of the non-Federal sector such as using locality pay for white
collar workers and providing flexibility to compete for skills in short supply; and (5) indexing military
increases directly to increases in the non-Federal sector rather than to Federal civilian white collar
increases.

Rationale
These proposals will reduce outlays very substantially. Equally important, they will produce a
structure of employee pay and benefits that is fair to both the employee and the taxpayer while
insuring that the Government is able to attract and retain a workforce with the qualifications,
experience and skills it needs to achieve the objectives set for it.

Key Facts About the Program
A number of major studies of the civilian paysetting procedures have been conducted in the last
decade. All have found comparability with the private sector rates to be the best basis for Federal
paysetting, but all have recommended changes in the current methods of implementing that concept.
The latest major study was made by the Ford administration, and its recommendations were converted
by the Carter administration into a legislative proposal for comprehensive reform. It was not adopted
by the last Congress.
The Reagan Administration reviewed the previous Administration's proposal, retained its major
provisions and added a provision establishing the comparability standard at 94 percent of non-Federal
pay and benefits. This legislative proposal was forwarded to the Congress on March 24, 1981.

396

The provisions of the bill will be implemented over a 3 year period. For example, we anticipate that
the 94 percent standard will be phased-in in 3 equal installments. Similarly, locality pay will be
gradually extended throughout the nation. Enactment of this proposal is expected to result in a white
collar pay increase in October 1981 of about 4.8 percent, and total savings of $3.7 billion in FY 1982
alone.
The table above measures savings from the previous Administration's budget and only for civilians
employed in civilian agencies. As such, it does not take into account increases under current law and
does not measure savings for civilians employed by the Department of Defense. Accordingly, the
table below gives a more comprehensive picture of the full, Government-wide savings to be achieved
by enactment of the legislation proposed.
Total Civilian Pay Increase, Including DOD Civilians
1982
Current Law:
Proposed Legislation:
Savings:

5.7
2.0
3.7

397

(outlays in billions of dollars)
1983
1984
1985
10.6
5.3
5.3

15.0
8.8
6.2

19.4
12.7
6.7

1986
23.5
16.4
7.1

Davis-Bacon and Service Contract Acts
Agency: Governmentwide

Functional
Code: 051,921

Funding
1981

1982

Budget Reform
Criterion: 8
($ in millions)
1983
1984

1985
1986
Expected Savings (Budget Authority/
Outlays): 1
70
130
200
Defens^
250
350
150
Non-Defense
270
400
550
650
220
400
600
Total
800
1000
1/ These savings estimates are based on previous studies. More definitive data will be obtained from the agencies in the course
of reviewing specific administrative modifications. Since data was not available to spread the expected savings by agency
account, the non-defense savings were applied by reducing the Allowance for Contingencies
2/
Also included in separate section on Department of Defense Savings.

Program Description
Under the Davis-Bacon and Service Contract Acts, the Department of Labor, through administration
of the Acts, establishes minimum wage rates, based on a prevailing wage concept, for wages and
benefits paid to workers by Government construction and service contractors. Studies indicate that
minimum wage rates set under authority of these Acts on the average result in added costs to the
Federal Government. For FY 1982, the Davis-Bacon Act will cover about $32 billion of direct
Federal or Federally-assisted construction contracts above the current threshold of $2,000. The
Service Contract Act covers an additional estimated $5-10 billion per year of Federal contracts for
services above the current threshold of $2,500.

Proposed Change
The Administration is conducting a review of administrative practices under the Davis-Bacon and
Service Contract Acts. The principal objective of the review is to modify administrative practices to
ensure that prevailing wage determinations made by the Department of Labor under these Acts reflect
actual minimum wages paid in localities where Federal contracts are performed.
Reform of
administrative practices is expected to result in cumulative savings of about $3 billion by 1986.

Rationale
This review of administrative practices is an integral component of the Administration's overall effort
to reduce Federal overhead, personnel costs, and program waste and inefficiency.
Previous studies by the Council of Economic Advisers, GAO, OMB, and academicians have indicated
that substantial savings in agency budgets could be achieved by revising current administrative
practices. These studies estimate that current administrative practices result in wage rate
determinations for Federal contracts at levels generally higher than those paid in private industry.
Costs to the Federal Government are inflated by approximately 6-7 percent of total contract costs as a
result of current practices.
Some economists have suggested that current practices tend to pull private industry wages upward,
thereby further fueling inflation.
Current practices tend to discriminate against young, minority, and female workers trying to break
into construction trades. Administrative reform will improve competitiveness in Federal contracting
and also encourage greater equity in the labor markets.
Private industry has long contended that the prevailing wage laws result in added costs to contractors
by requiring higher wage standards under Federal contracts. Current practices undermine the
collective bargaining process and create internal labor strife with some workers paid at collectively
bargained rates while others are paid at higher, administratively-determined rates.

398

Key Facts About the Program
The most recent GAO analysis (HRD-81-10 — Review of Costs on METRO Construction) of the
inflationary impact of wage rate determinations under the Davis-Bacon Act indicates that current
administrative practices increase total construction costs by 6.8 percent. As a result, METRO
construction costs could be increased by about $149 million.
The GAO survey in Montgomery County, Maryland found that the prevailing wage rates set by DOL
were higher than actual rates in similar private construction in the locality. For example: For a
laborer, the actual rate was $6.05, while DOL's prescribed rate was $10.95—$4.90 higher (55 percent
higher); for a carpenter, the actual rate was $9.24, while DOL's prescribed rate was $13.56—$4.32
higher (68 percent higher); for a power equipment operator (bulldozer), the rate was $8.99, while
DOL's prescribed rate was $13.72—$4.73 higher (65 percent higher).
An earlier GAO review (HRD-79-18) of 30 Federal or Federally assisted construction projects, costing
an estimated $25.9 million, showed that the majority of the wage rate determinations issued by DOL
were higher than the actual rates in 12 of the localities. The higher wage rate determinations
prescribed by DOL on average were 37 percent higher (ranging from 5-123 percent higher than actual
wages) than the comparable wage rates prevailing in the localities.
A study completed by the Council of Economic Advisers in 1979 concluded that total Federal
Government construction costs could be reduced by 5.6-11 percent if labor costs on construction
projects were brought down to levels prevailing in private construction.

399

Appendices

401

APPENDIX I
Rescissions Proposed and Deferrals Reported in Conjunction With
The President's Budget Revisions
(in thousands of dollars)
Budget
Authority
Rescissions Proposed (122)
Deferrals Reported (2o new items, 5 revised deferrals)
TOTAL, RESCISSION PROPOSALS AND DEFERRALS

14,757,545
1,704.642
16,462,187

RESCISSION PROPOSALS
Rescission #
R81-38
R81-34
R81-39
R81-40
R81-41
R81-42
R81-43

R81-44
R81-45
R81-46
R81-47
R81-48
R81-119
R81-120
R81-121

R81-49
R81-50
R81-51
R81-123
R81-52
R81-53
R81-54

Item
Executive Office of the President
Council on Environmental Quality and Office of
Environmental Quality
Council on Wage and Price Stability
Salaries and expenses
Office of Science and Technology Policy
Salaries and expenses
Funds Appropriated to the President
Appalachian Regional Development Programs
Disaster Relief.
International Development Assistance
Sahel development program
Inter-American Foundation
Department of Agriculture
Agricultural Stabilization and Conservation Service
Dairy and beekeeper indemnity programs
Rural Electrification Administration
Rural communication development fund
Farmers Home Administration
Rural development planning grants
Rural community fire protection grants
Rural housing supervisory assistance grants
Rural housing insurance fund
Agriculural credit insurance fund
Rural development insurance fund
Department of Commerce
Economic Development Administration
Economic development assistance programs
Regional Development programs
Regional development programs
United States Travel Service
Salaries and expenses
National Oceanic and Atmospheric Administration
Operations, research, and facilities
Construction
Costal energy impact fund
Science and Technical Research
Scientific and technical research and services

403

Budget
Authority

708
1,500
595
110,000
8,000
2,000
138

1,500
16,341
2,000
1,500
500
316,000 ^ r
88,850
160,000

342,350
21,000
41
36,493
9,000
40,000
3,370

Rescission #

Item
National Telecommunications and Information Administration
Salaries and expenses
Public telecommunications facilities, planning and
construction
Maritime Administration
Research and development

R81-55
R81-124
R81-56

Department of Education
Office of Elementary and Secondary Education
School assistance in federally affected areas
Equal educational opportunities
Elementary and secondary education
Office of Special Education and Rehabilitation Services
Education for the handicapped, gifted and talented
Rehabilitation services and handicapped research
Office of Vocational and Adult Education
Vocational and adult education
Office of Postsecondary Education
Student loan insurance
Higher and continuing education
College housing loans
Office of Educational Research and Improvement
Libraries and learning technologies
Institute of museum services
School improvement programs
Department of Energy
Energy Programs
Energy supply, research and development activities operating expenses
Energy supply, research and development activities plant and capital equipment
.
Fossil energy research and development
Fossil energy construction
Energy production, demonstration, and distribution
Energy conservation
Energy information administration
Economic regulation
Geothermal resources development fund
Alternative fuels production
Departmental Administration

R81-125
R81-57
R81-126
R81-58
R81-59
R81-127
R81-128
R81-129
R81-60
R81-61
R81-62
R81-63

R81-130
R81-131
R81-132
R81-64
R81-65
R81-133
R81-66
R81-67
R81-68
R81-69
R81-70

Budget
Item Authority

313
25,717
2,500

66,500
73,253
982,385
267,938
22,323
238,777
103,270
49,239
14,550
42,750
12,357
36,606

126,609
7,967
65,932
246,900
12,649
306,045
13,443
33,155
22,066
300,000
11,500

Department of Health and Human Services
R81-134
R81-71
R81-135
R81-136
R81-137
R81-138
R81-139
R81-140
R81-72
R81-73

Health Services Administration
Health Services
Indian health facilities
Centers
for Disease
Preventive
healthControl
services
National Institutes of Health
National Cancer Institute
National Heart, Lung and Blood Institute
National Institute of Dental Research
National Institute of Arthritis, Metabolism, and
Digestive Diseases
National Institute of Neurological and Communicative
Disorders and Stroke
National Institute of Allergy and Infectious Diseases
National Institute of General Medical Sciences

404

11,616
8,871
38,520
17,986
11,120
700
3,943
4,388
1,088
18,682

Rescission #

R81-141
R81-142
R81-143
R81-144
R81-145
R81-146
R81-147
R81-148
R81-74
R81-149
R81-75
R81-76
R81-77
R81-78
R81-150

Item
National Institute of Child Health and Human
Development
National Eye Institute
National Institute of Environmental Health Sciences
National Institute of Aging
Research Resources
National Library of Medicine
Office of the Director
Alcohol, Drug Abuse, and Mental Health Administration
Alcohol, drug abuse, and mental health
Construction and renovation, St. Elizabeths Hospital
Health Resources Administration
Health resources
Office of Assistant Secretary for Health
Salaries and expenses
Health Care Financing Administration
Payments to health care trust funds
Program management
Social Security Administration
Refugee assistance
Human Development Services
Human development services

Budget
Item Authority

4,119
3,856
2,179
1,593
3,714
341
360
98,370
1,020
131,751
30,724
8,693
6,992
25,100
10,100

Department of Housing and Urban Development

R81-81
R81-82

Housing Programs
Subsidized housing programs
Congregate services program
Solar Energy and Energy Conservation Bank
Assistance for solar and conservation improvements
Community Planning and Development
Planning assistance
Rehabilitation loan fund

R81-83
R81-84

Neighborhoods, Voluntary Associations and Consumer
Protection
Housing counseling assistance
Neighborhood self-help development program

R81-79
R81-151
R81-80

5,099,104
10,000
121,000
34,976
110,857

6,000
8,119

Department of the Interior
R81-85
R81-86
R81-87
R81-88
R81-89
R81-90
R81-91
R81-35

R81-92

Office of Water Research and Technology
Salaries and expenses
United States Fish and Wildlife Service
Construction and anadromous fish
National Park Service
Urban park and recreation grants
Land and water conservation fund
Historic preservation fund
Construction (trust fund)
Office
of Surface
Reclamation and Enforcement
Regulation
andMining
technology
Office of the Solicitor and Office of the Secretary
Youth conservation corps
Department of Labor
Employment and Training Administration
Temporary employment assistance
Department of State

405

11,800
2,500
35,000
250,000
8,000
15,500
1,954
38,194

234,475

Rescission #

Item

Budget
Authority

R81-96

Bureau of Refugee Programs
Migration and refugee assistance
Bureau for International Narcotics Matters
International narcotics control
Department of Transportation
Urban Mass Transportation Administration
Urban mass transportation fund..
Research and Special Programs Administration
Cooperative automotive research

R81-97

Department of the Treasury
Bureau of Government Financial Operations
Biomass energy development

1,245,500

R81-98
R81-99
R81-100

Environmental Protection Agency
Research and development (pollution and abatement)
Abatement, control and compliance
Construction grants

149
1,253
1,700,000

R81-101

National Aeronautics and Space Administration
Research and development

R81-102

Veterans Administration
Construction, major projects

R81-93
R81-94
R81-95

R81-103
R81-104
R81-152
R81-105
R81-106
R81-153
R81-107
R81-108
R81-109
R81-36
R81-37
R81-110
R81-111
R81-112

R81-113
R81-154

Other Independent Agencies
ACTION
Operating expenses, domestic programs
Arms Control and Disarmament Agency
Arms control and disarmament activities
Community Services Administration
Community services program
Coiporation for Public Broadcasting
Public broadcasting fund
Federal Mediation and Conciliation Service
Salaries and expenses
Federal Mine Safety and Health Review Commission
Salaries and expenses
Federal Trade Commission
Salaries and expenses
Marine Mammal Commission
Salaries and expenses
Merit Systems Protection Board
Salaries and expenses
5
National Consumer Cooperative Bank
Investment in National Consumer Cooperative Bank
Self-help development and technical assistance
National Science Foundation
Research and related activities
Science and engineering education activities
Occupational Safety and Health Review Commission
Salaries and expenses
Office of the Federal Inspector for the Alaska
Natural Gas Transportation System
Salaries and expenses
Postal Service
Payment to the Postal Service Fund
406

22,500
3,100
24,700
11,500

4,500
162,160

3,207
1,500
6,000
95,000
687
186
226
4
210
59,849
29,990
66,000
16,000
39

445
250,000

Rescission #
R81-114
R81-115
R81-116
R81-155
R81-117
R81-118

Item
Pennsylvania Avenue Development Corporation
Salaries and expenses
Selective Service System
Salaries and expenses
Small Business Administration
Salaries and expenses
Tennessee Valley Authority
Tennessee Valley Authority fund
Tennessee Valley Authority fund
Water Resources Council
Water resources planning

Budget
Authority
60
1,940
1,405
177,000
500
5,000

Off-Budget Federal Entities:

R81-122

Department of Agriculture
Rural Electrification Administration
Rural electrification and telephone revolving fund
Subtotal, rescission proposals

187,000
14,757,545

1/ Includes four proposals to reduce authority to incur obligations for direct loans by a total of $751.8
million.
2/ This amount represents a proposed reduction in authority to incur obligations for direct loans.

DEFERRALS REPORTED
Deferral #

D81-79

Item
Funds Appropriated to the President
Appalachian Regional Development Programs
Appalachian regional development programs

Budget
Authority

10,000

D81-80

Department of Commerce
Minority Business Development Agency
Minority business development
Maritime Administration
Ship construction

92,000

D81-81

Department of Defense - Civil
Corps of Engineers, Civil
Construction, general

10,000

D81-82

Department of Education
Office of Postsecondary Education
Higher education facilities loan and insurance

25,000

D81-103

D81-29A
D81-83

Department of Energy
Atomic Energy Defense Activities
Operating expenses
Energy Programs
Strategic petroleum reserve

407

3,400

10,000
8,000

Deferral #
D81-33A

Budget
Authority

Item
Fossil energy construction

205,000

D81-104

Department of Health and Human Services
Social Security Administration
Limitation on administrative expenses

8,004

D81-84

Department of Housing and Urban Development
Policy Development and Research
Research and technology

5,000

D81-87

Department of Justice
General Administration
Salaries and expenses
Federal Prison System
Salaries and expenses
Office of Justice Assistance, Research and Statistics
Law enforcement assistance

D81-36A

Department of Labor
Employment and Training Administration
Employment and training assistance

D81-85
D81-86

D81-88
D81-17B
D81-89
D81-90
D81-91
D81-92
D81-93
D81-94
D81-95
D81-96
D81-97
D81-98

D81-99
D81-100
D81-101
D81-41A
D81-102

Department of Transportation
Office of the Secretary
Transportation planning, research and development
Federal Aviation Administration
Facilities and equipment (Airport and airway trust fund)
Federal Highway Administration
Trust fund share of other highway programs
Federal Railroad Administration
Railroad research and development
Rail service assistance
Northeast corridor improvement program
Urban Mass Transportation Administration
Urban mass transportation fund
Research and Special Programs Administration
Research and special programs
Veterans Administration
Medical care
Medical and prosthetic research
Medical administration and miscellaneous operating
expenses
Construction, major projects
Other Independent Agencies
General Services Administration
Office of Inspector General
Allowances and office staff for former Presidents
Consumer information center
Small Business Administration
Business loan and investment fund
Surety bond guarantees revolving fund
Subtotal, deferrals

408

7,485
4,385
670

729,187

1,040
365,783
21,500
383
80,341
125,000
210,000
3,100
29,389
1,690
515
183,493

444
8
50
113,400
6.000
(2,260,267)

Item
New items reported by President Reagan
Changes to amounts reported initially by the previous
Administration
Effect of deferrals reported by President Reagan
Amounts reported initially by the previous Administration.
TOTAL, RESCISSION PROPOSALS
AND DEFERRALS

409
344-211 0 - 8 1 - 1 4

Budget
Authority
(836,897)
(867.745)
(1,704,642)
(555,625)

16,462,187

APPENDIX II
Programs Being Recommended for Termination over 1981-1986
EXECUTIVE OFFICE OF THE PRESIDENT
Council on Wage and Price Stability
FUNDS APPROPRIATED TO THE PRESIDENT
Appalachian Regional Development program
Non-highway programs
International Development Assistance
African development foundation
DEPARTMENT OF AGRICULTURE
Commodity Credit Corporation
Storage Facility loans (termination in 1986)
Rural Electrification Administration
REA direct loans to telephone companies
Farmers Home Administration
Alcohol fuels/biomass loans program
Business and industry loan guarantee program
Home ownership assistance program
Rural development planning grants
Rural community fire protection
Rural housing supervisory assistance grants
Food and Nutrition Service
Summer feeding program
Snack subsidies
Nutrition education
Equipment assistance
Meal subsidies for middle/upper income students
Forest Service
Grants for forest management on State and county lands
in Northern Minnesota
DEPARTMENT OF COMMERCE
Office of the Secretary
Secretarial representatives
Office of productivity, technology, and innovation
International Trade Administration
Small business export expansion
Economic Development Administration
Regional Development Commissions
National Telecommunications and Information Administration
Public telecommunications facilities grant program
National Oceanic and Atmospheric Administration
Coastal energy impact program
Coastal zone management state grant program
Fisheries development and state grant programs
National ocean satellite system (NOSS) (Commerce portion)
Sea grant program

411

DEPARTMENT O F DEFENSE
Stand-off Jammer Systems development
8" Artillery rocket projectile development
National ocean satellite system (NOSS) (Defense portion)
Shipboard laser guided weapon (Seafire)
Tactical electronic warfare decoy system (TEWDS)
Human and manpower effectiveness study
Anti-ship torpedo defense development
VCX (new carrier-on-board delivery aircraft development)
Mine-laying/cargo aircraft development
Small submarine development
Laser acquisition device development
High-altitude high-speed target development
DEPARTMENT O F EDUCATION
College libraries
Institute of Museum Services
Veterans cost of instruction
Educational outreach programs
Land Grant Colleges (permanent appropriation)
Public service grants and fellowships
Mining fellowships
Law school clinical experience
Special foreign currency program (P.L. 86-610)
DEPARTMENT OF ENERGY
Fossil Programs
Fossil commercialization
Synthetic Fuels feasibility studies/cooperative agreements (2nd solicitation)
Coal loan guarantees
Solar programs
Alcohol fuels subsidies
Ocean thermal energy conversion
Solar MX-renewable energy system
Other Energy Supply Programs
Geothermal loan guarantees
Small hydropower subsidies
Energy Impact Assistance
Energy Conservation Programs
Consumer products technology
Industrial conservation
Appropriate technology small grants
Building energy performance standards
Appliance efficiency standards
Community systems market development
Residential/commercial conservation service and auditor training
Innovative conservation delivery demonstrations
Energy extension service
State energy conservation grants (basic and supplemental)
State energy emergency planning grants
Energy Regulation Programs
Administration of oil price and allocation controls
Standby gasoline rationing
Conversion of utilities and others to coal and other alternative fuels
Rate reform assistance to public utility commissions
Interventions in State utility rate-making proceedings
Hydropower resources analysis
International Affairs
Country energy assessment

412

DEPARTMENT OF HEALTH AND HUMAN SERVICES
Merchant seamen entitlement and PHS hospitals and clinics
End State Renal Disease Network Councils
Clinical Training for Mental Health and Substance Abuse (1983)
Office of Smoking and Health
National Institute of Occupational Safety and Health training
Nursing Research Grants
Nursing Fellowships
Health Professions loans, nursing loans, nursing capitation, nursing
traineeships, Nursing Scholarships
Health Professions schools start-up
Dental Training
Emergency Medical Training
Allied Health
Health Professions Education Improvement and Development
Health planning
Maternal and child health research and training
Exceptional needs scholarships
National Center for Health Care Technology
Health Maintenance Organizations
Professional Standards Review Organizations (PSRO's)
Vocational rehabilitation
National Clearinghouse on Aging
Cuban refugee phasedown
Cuban/Haitian entrants education assistance
DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
Non profit sponsor assistance
Section 202, Elderly and Handicapped Housing Fund
Section 11B, Tax exempt financing
Indian Housing
GNMA Sepcial Assistance Functions Fund; Section 8 and Targeted tandem
assistance programs
Solar and Energy Conservation Bank
Planning assistance
Rehabilitation loan fund
Neighborhood self-help development program
DEPARTMENT OF THE INTERIOR
Urban Park Rehabilitation Fund
Land and Water Conservation Fund, State recreation grants
Office of Water Research and Technology
Saline research and development program
Youth Conservation Corps
DEPARTMENT OF JUSTICE
Office of Justice Assistance, Research, and Statistics,
Juvenile justice and delinquency prevention program
DEPARTMENT OF LABOR
Employment and Training Administration
Public service employment,
(Title II-D and Title VI
of the Comprehensive Employment and Training Act)
Young Adult Conservation Corps (YACC-Title VIII of the
Comprehensive Employment and Training Act)
Welfare Reform Demonstrations (Title III of the
Comprehensive Employment and Training Act)

413

DEPARTMENT OF TRANSPORTATION
Federal Railroad Administration
Local rail service assistance program (low volume railroad branch lines)
Urban Mass Transportation Administration
Mass transit operating subsidies
Waterborne demonstration project
Research and Special Programs Administration
Cooperative automotive research program
ENVIRONMENTAL PROTECTION AGENCY
Clean Lakes program
Subtitle D, Solid waste management grants
Resource recovery local financial assistance
Solid waste technical assistance panels
Noise control program
OTHER INDEPENDENT AGENCIES
ACTION;
Volunteers in Service to America (VISTA)
Architectural and Transportation
Barriers Compliance Board
Civil Aeronautics Board
406 subsidy programs
Federal Mediation and Concilation Service:
Grants for Labor-Management Committees
General Services Adminstration
Historical grants to the National Historical Publication
and Records Commission
Legal Sendees Corporation
National Consumer Cooperative Bank
National Science Foundation
Science and engineering education
Office of Personnel Management
Intergovernmental Personnel Act (IPA) program
Payment to the Postal Sena ce Fund
Public service subsidies
Small Business Administration
Non-physical disaster loans
Women's business enterprise
Small business development center program
U.S. Railway Association
Conrail subsidies
Water Resources Council

414

Indices

415

INDEX I
Keyword Index by Program
Program

Department/Agencv

ACTION (Domestic programs)
Adult Student Benefits, Social Security
Aid to Families with Dependent Children (AFDC)
Airport Construction
Airway and Airport Trust Fund
Agency for International Development (AID)
Alcohol, Drug Abuse, and Mental
Health Administration
Alcohol Fuels/Biomass/Urban Waste
AMTRAK
Appalachian Regional Commission (ARC)

Paae

Other Agencies
Health and Human Services

335
172

Health and Human Services
Transportation
Transportation
Foreign Assistance

139
255
257
329

Health and Human Services
Energy
Transportation
Other Agencies

144
109
259
336

Architectural and Transportation
Barriers Compliance Board
Arts, National Endowments for
Auto, Cooperative Reserach

Transportation

338
366
266

Beneficiary Travel, VA
Black Lung Disability Trust Funds
Block Grants Education

Veterans Administration
Labor
Education

307
229
86

Block Grants, HHS

Health and Human Services

Boat and Yacht User Fees (Coast Guard)
Budget Reform Criterion Index
Building Construction, GSA

Transportation
Index II

Other Agencies
Other Agencies

Other Agencies
Interior
Other Agencies

Bureau of Indian Affairs
Business Credit Assistance, SBA
CCC, Interest Rates/Waiver Changes
CCC, Storage Facility Loan
CETA
Chesapeake Bay Program
Child Nutrition
Child Support Enforcement
Civil Aeronautics Board
Civil Service Retirement Annuities, OPM
Clean Lakes
Coast Guard, User fees
Coastal Energy Impact Program (CEIP), NOAA
Coastal Zone Management (CZM), NOAA
College Housing Loans
Common Fund for Commodities

209
378

Agriculture
Agriculture
Labor
Environmental Protection Agency
Agriculture
Health and Human Services
Other Agencies
Other Agencies

23
25
231-235
291
21
139
340
371

Environmental Protection Agency
Transportation
Commerce

291
262
61

Commerce
Education
Foreign Assistance

417

146,148,150
262
425
354

61
85
332

Program

Department/Agency

Commodity Credit Corportation (CCC)
Agriculture
Community Development Block Grants (CDGB) Housing and Urban Development
Community Services Administration
Other Agencies
CONRAIL
Transportation
Conservation Cost Sharing
Agriculture
Conservation, Energy
Energy
Construction, VA
Veterans Administration
Consumer Cooperative Bank
Other Agencies
Consumer Product Safety Commission
Other Agencies
Cooperative Automotive Research Program
Transportation
Corporation for Public Broadcasting
Other Agencies
Correspondence Courses, VA
Veterans Administration
Council on Wage and Price Stability
Other Agencies
Cubans/Haitians, Domestic Assistance
Health and Human Services
Davis-Bacon Act
Defense Savings
Deferrals
Dental Treatment, V A
Disability Insurance, Social Security
Disaster Loan Assistance, SBA
District of Columbia

Savings Affecting Many Agencies
Defense-Military
Appendix I
Veterans Administration
Health and Human Services
Other Agencies
Other Agencies

Economic Development and Title V
Regional Commissions Programs
Elementary and Secondary Education
Block Grants
Employment and Training Grant
Consolidation, CETA
Employment Service
Energy, Administrative Reductions
Energy and Emergency Assistance Block Grant
Energy Research and Development, EPA
Energy Sciences
Executive Office of the President (EOP),
Resources
Ex-Servicemember Unemployment
Compensation
Export-Import Bank
Extended Benefits, Unemployment
Compensation

418

23,25
182
342
264
27
113
308
364
343
266
344
311
346
152
398
71
403
309
174
380
347

Commerce

Education

Labor
Labor
Energy
Health and Human Services
Environmental Protection Agency
Energy

231
237
111
146
293
119

Other Agencies

348

Labor
Other Agencies

242
349

Labor*

243

Agriculture
Savings Affecting Many Agencies
Other Agencies
Labor
Other Agencies

Farmers Home Administration (FmHA)
Federal Civilian Employment Reductions
Federal Emergency Management Agency
Federal Employee Injury Compensation
Federal Protective Service, GSA

Page

29-36
390
351
238
359

Program

Department/Agency

Page

Federal Trade Commission
FmHA, Business and Industry Loan Program
FmHA, Direct Lending
FmHA, Grant and Home Ownership Assistance
Fish and Wildlife Service
Fisheries Management and Development, NOAA
Flight Training, VA
Flood Insurance Program, FEMA

Other Agencies
Agriculture
Agriculture
Agriculture
Interior
Commerce
Veterans Administration
Other Agencies

352
29
31
34
210
61
311
351

Food Aid P.L. 480

Foreign Assistance

330

Food Stamps
Foreign Affairs, Operation of
Foreign Development Assistance
Forest Service
Fossil, Energy
Functional Index
Fusion, Energy

Agriculture
State
Foreign Assistance
Agriculture
Energy
Index III
Energy

37
251
323
39
120
433
123

General Flight Training, GI Bill
General Science, Energy

Veterans Administration
Energy

311
122

General Services Administration

Other Agencies

GI Bill, No Extension
GI Bill, Flight Training and
Correspondence Training
GNMA Mortgage-Backed Securities
Government National Mortgage
Association (GNMA) Tandum
Grain Inspection, user charges
Grant and Home Ownership Assistance, FmHA
Great Lakes
Great River Road

Veterans Administration

310

Veterans Administration
Housing and Urban Development

311
184

Housing and Urban Development
Agriculture
Agriculture
Environmental Protection Agency
Transportation

186
50
34
291
267

Health Block Grants
Health Maintenance Organizations (HMOs)
Health Planning
Health Professions Education
Higher and Continuing Education
Highway Construction Program
Highway Safety Grants (402)
Highway Safety Program, Research
and Development, Regulations
Historic Publication and Records
Commission Grants, GSA
Housing Counseling
Humanities, National Endownments for
HUD, Administrative Expenses

Health and Human
Health and Human
Health and Human
Health and Human
Education
Transportation
Transportation

148
153
155
156
90
268
271

419

354-359

Services
Services
Services
Services

Transportation

272

Other Agencies
Housing and Urban Development
Other Agencies
Housing and Urban Development

356
188
366
181

Program

Department/Agencv

Page

Impact Aid
Index:
Budget Reform Criterion
Functional Index
Program Index

Education

Index II
Index III
Index I

425
433
417

Indian Health Service

Health and Human Services

Indian Housing
Information, Energy

Housing and Urban Development
Energy

158
204

Institute of Museum Services

Education

Insurance Loans, VA
Intergovernmental Personnel Act, OPM
International Communication Agency
International Organizations

Veterans Administration
Other Agencies
Other Agencies
Foreign Assistance

312

Justice, Department Employment
Juvenile Justice and Delinquency Prevention

Justice
Justice

223
225

Keyword Index by Program

Index I

417

LANDS AT (Land Remote Satellite Sensing)
Legal Services Corporation

Commerce
Other Agencies
Education

59
362'

Energy
Commerce
Transportation

123
57

Library Programs
Magnetic Fusion
Maritime Assistance
Mass Transit, Urban
Medicaid
Medical Care, VA
Medical Staffing, VA
Merchant Seamen (PHS) Hospitals/Clinics
Mineral Leasing Acceleration
Minimum Payment Amount, Social Security
Minority Development Assistance
Minority Procurement Program, SBA
Mortage-Backed Securities, GNMA
Modernization, Public Housing

Health and Human Services
Veterans Administration
Veterans Administration
Health and Human Services
Interior
Health and Human Services
Commerce
Other Agencies
Housing and Urban Development
Housing and Urban Development

115
95
373
361
328

280,282
159
316
317
167
214
176
66
328
184
206

Multilateral Development Banks

Foreign Assistance

NASA, Reductions in Research and
Development
National Aeronautics and Space Administration
National Center for Health Care Technology

National Aeronautics and Space Administration 301
Nationaal Aeronautics and Space Administration 301
Health and Human Services
161

325

National Consumer Cooperative Bank
National Defense Stockpile, sales of
excess materials, GSA

Other Agencies

364

Other Agencies

357

National Endowments for Arts/Humanities

Other Agencies
Health and Human Services

366
162

National Health Service Corps

420

Program

Department/Asencv

National Institute of Education

Education
Health and Human Services

National Institutes of Health
National Oceanic and Atmospheric
Administration (NOAA)
National Ocean Satellite System (NOSS),
NOAA

Commerce
Commerce
Labor
Other Agencies

National Programs, CETA
National Science Foundation
National Telecommunications and
Information Administration

Commerce
Housing and Urban Development
Commerce
Transportation

Neighborhood Self-Help Development
NOAA, Ocean programs
Northeast Corridor Improvement Project
Nutrition Assistance for Puerto Rico
Office of Personnel Mangement (OPM),
Civil Service Retirement
Office of Personnel Management (OPM),
Intergovernmental Personnel Act
Office of Productivity, Technology
and Innovation
Office of Water Policy
Office on Smoking and Health
Operating Subsidies, Public Housing
Other supply, Energy
Pay Comparability Standard, relatedsavings
Payment in Lieu of Taxes
Payments on a Worker's Death,
Social Security
Peace Corps
Personnel, Office of Personnel Management
Physicians/Dentists Bonuses, VA
P.L. 480, Food Aid
Planning Assistance
Postal Service
Professional Standards Review
Organizations (PSROs)
Program Index
Program Level, Subsidized Housing
Programs Being Recommended for
Termination over 1981-1986
Public Health Service (PHS)
Commissioned Corps
Public Health Service (Merchant
Seamen) Hospitals and Clinics
Public Housing Modernization
Public Housing, Operating Subsidies

421

Page
99
164
59,61,66
61
233
369

Agriculture

65
189
61
274
41

Other Agencies

371

Other Agencies

373

Commerce
Water Resources Progrants
Health and Human Services

66
78
165

Housing and Urban Development
Energy

192
125

Savings Affecting Many Agencies
Interior

396
216

Health and Human Services

177

Foreign Assistance
Other Agencies
Veterans Administration
Foreign Assistance
Housing and Urban Development
Other Agencies

331
371,373
314
330
190
374

Health and Human Services
Index I
Housing and Urban Development

166
417
199

Appendix II

411

Health and Human Services

169

Health and Human Services
Housing and Urban Development
Housing and Urban Development

167
206
192

Program

Department/Agency

Page

Public Service Jobs, CETA
Public Telecommunications Facilities Grants

Labor

Railroad Branchlines
Railroad Restructuring Assistance
Railroad Retirement Board
Readjustment Counseling Centers, VA
Refugee Assistance, Domestic
Regional Development Commissions
Regular Benefits Work Test

Transportation
Transportation
Other Agencies

Regulation, Energy

Energy

117

Regulation Reduction Savings
Regulatory Program Reductions, EPA
Rehabilitation Loans

Savings Affecting Many Agencies
Environmental Protection Agency
Housing and Urban Development

389
294
194

Remote Land Satellite Sensing (LANDSAT)
Rental Assistance Payments
Rescissions and Deferrals
Research and Technology, HUD
Rural Electrification Administration (REA),
Community Antenna (Cabie) Loans
Rural Electrification Administration (REA),
Direct Lending
Rural Electrification Administration (REA),
Telephone Bank Capital Stock
Purchases
Savings Due to Reduction in Regulations
Sea Grant Termination, NOAA

Commerce
Housing and Urban Development
Appendix I
Housing and Urban Development

59
203
403
195

Commerce

Veterans Administration
Health and Human Services
Commerce
Labor

Service Contract Act
Small Business Administration
Small Business Development Center
Social Security, Overview
Social Services Block Grant
Solar, Energy
Solar Energy and Conservation Bank
Special Milk
Special Population Programs
Special Suplemental Food Program for
Women, Infants and Children
State Department, Operation of Foreign Affairs
Student Assistance
Student Loan Marketing Association
Subsidized Housing
Subsidized Housing, Summary
Surface Mining, Regulation and Reclamation
Superfund
Supplemental Security Income

276
278
376
319
170
55
245

Agriculture

Agriculture
Savings Affecting Many Agencies
Commerce
Savings Affecting Many Agencies
Other Agencies
Other Agencies
Health and Human Services
Health and Human Services
Energy
Housing and Urban Development
Agriculture
Education

46
389
61
398
378-382
382
172
150
128
196
48
101

Agriculture
State

49
251

Education
Other Agencies

103
384

Housing and Urban Development
Housing and Urban Development
Interior
Environmental Protection Agency
Health and Human Services
422

235
65

198-206
198
217
295
178

Program

Department/Asencv

Page

Synfuels

Energy

131

Tandem, GNMA
Targeting Recreation and Conservation
Expenditures
Telecommunications and Information
Administration
Telephone Bank Capital Stock Purchase, REA

Housing and Urban Development

186

Interior

212

Tenant Rent Burden, Subsidized Housing
Termination, Programs Recommended for,
1981-1986
Trade Adjustment Assistance
Treasury Law Enforcement/Tax
Administration Staffing

Housing and Urban Development

201

Appendix II
Labor

411

Treasury

287

Commerce
Agriculture

Unemployment Comensation for
Ex-Servicemembers

65
46

240

Labor

242
243,245
134
182

Unemployment Insurance
Uranium Enrichment
Urban Development Action Grants (UDAG)
Urban Mass Transit, Capital Assistance
Urban Mass Transit, Operating Assistance
User Charges for Grain Inspection and
Cotton and Tobacco
User Fees, Waterways/Deep Draft Ports

Labor
Energy
Housing and Urban Development

Veterans Medical Program
Veterans Readjustment Counseling
Centers
Vocational Education

Veterans Administration

316,317

Veterans Administration
Education

319.
105

Wage and Price Standards

Other Agencies

346

Wastewater Treatment Grants
Water and Sewer Loan Levels and
Interest Rates, FmH A
Water Resource Development Construction
Water Projects Unfunded
Water Research and Technology
Water Resources Council/Office of Water Policy
Waterway and Port User Fees

Environmental Protection Agency

297

Agriculture
Water Resources
Water Resources
Water Resoruces
Water Resources
Water Resources

Transportation
Transportation

280
282

Agriculture
Water Resources Programs

50
80

Women's Business, SBA
Work Test, Unemployment Insurance

Other Agencies

36
76
75
77
78
80
382

Labor

245

Young Adult Conservation Corps
Youth Conservation Corps
Youth Initiative

Labor

246

Interior
Labor

219
248

423

Programs
Programs
Programs
Programs
Programs

INDEX II
Budget Reform Criterion Index

Page
I.

REVISE ENTITLEMENTS

TO ELIMINATE

UNINTENDED

BENEFITS

Adult Student Benefits

172

AFDC and Child Support Enforcement

139

Annual Indexation of Civil Service Retirement Annuities

371

Beneficiary Travel

307

Black Lung Disability Trust Fund

229

Cubans/Haitians, Domestic Assistance

152

Disability Insurance

174

Federal Employee Injury Compensation Program

238

FHA/GNMA Mortgage-Backed Securities

184

Food Stamps

G.I. Bill: Flight and Correspondence Training

311

G.I. Bill: No extension

310

Indian Housing

204

Insurance Loans, VA

312

Outpatient Dental Treatment

309

Medicaid

159

Minimum Payment Amount, Social Security

176

Payment in Lieu of Taxes

216

Payments on a Worker's Death, Social Security

177

Public Housing Operating Subsidies

192

Railroad Retirement Board

376

Rental Assistance Payments

203

Solar Energy and Energy Conservation Bank

196

425

Page

Special Milk

Subsidized Housing: Program Level

199

Supplemental Security Income

178

Tenant Rent Contribution

201

Trade Adjustment Assistance

240

Unemployment Compensation for Ex-Servicemembers

242

Unemployment Insurance: Extended Benefits

243

Unemployment Insurance: Regular Benefits Work Test

245

Vocational Education

105

REDUCE MIDDLE- UPPER INCOME

BENEFITS

Child nutrition

Public Health Service Commissioned Corps Physician Bonuses

169

Railroad Retirement Board

376

Student Assistance

103

RECOVERY CLEARLY ALLOCABLE

COSTS FROM USERS

(increase in governmental receipts)
Airport and Airway Trust Fund

257

Boat and Yacht User Fees (Coast Guard)

262

Flood Insurance Program

351

User Charges for Grain Inspection and Cotton and Tobacco

User Fees for Recovery for Construction and
Operation of Inland Waterways and Deep Ports
4.

APPL Y SOUND CRITERIA TO ECONOMIC SUBS ID Y PROGRAMS
Alcohol Fuels/Biomass/Urban waste

109

Appalachian Regional Commission

336

Business Credit Assistance

378

CAB Subsidy Elimination

340

CCC Interest Rates and Interest Waiver Changes

CCC Storage Facility Loans

426

Page

CETA: Public Service Jobs

231

CONRAIL

264

Disaster Loan Assistance

380

Economic Development and Tide V
Regional Commissions

Energy Conservation Programs

113

Export-Import Bank

349

FmHA Business and Industry Loan Program

FmHA Direct Lending

FmHA Water and Sewer Loan Levels and Interest Rates

Forest Service Reductions

Fossil Energy

120

GNMA Tandem Mortgage Assistance

186

Housing Counseling Assistance

188

Mineral Leasing Acceleration

214

Northeast Corridor Improvement

274

Other Energy Supply

125

Planning Assistance

190

Postal Service Subsidy Reduction

374

Railroad Branchlines

276

Railroad Restructuring Assistance
REA (Rural) Community Antenna Television (CATV)
Loans Elimination

278

REA Direct Lending Reductions (Including elimination
of FFB direct lending)

43
44

REA Rural Telephone Bank (Capital Stock
Purchase Elimination)

Solar Energy and Energy Conservation Bank

196

Solar Energy Development

128

Synthetic Fuels

131

Urban Mass Transit Operating Assistance

282

427

Page

STRETCH OUT AND RETARGET PUBLIC SECTOR
IMPROVEMENT

CAPITAL

PROGRAMS

ACTION (Domestic Programs)

335

Airport Construction Grant Program

255

AMTRAK

259

Building Construction

354

Bureau of Indian Affairs

209

Construction, VA

308

Cooperative Automotive Research Program

266

District of Columbia: Borrowing from the
U.S. Treasury

347

Great River Road.

267

Highway Construction Program

268

Highway Safety Program

271

Maritime Assistance

NOAA Ocean Programs

Public Housing Modernization

206

Subsidized Housing: Summary

198

Urban Mass Transit: Capital Assistance

280

Wastewater Treatment Grants

297

Water Resource Development Construction

Water Projects Unfunded

Water Research and Technology

IMPOSE FISCAL RESTRAINT

ON OTHER PROGRAMS OF

NATIONAL

INTEREST
ACTION (Domestic Programs)

335

Agency for International Development

329

Alcohol, Drug Abuse and Mental Health Administration

144

CETA: National Programs

231

Child nutrition

21
428

Page

Clean Lakes, Great Lakes, Chesapeake Bay
Program Reductions

291

College Housing Loans

Common Fund for Commodities

332

Conduct of Foreign Affairs

251

Conservation Cost-Sharing

Consumer Product Safety Commission

343

Corporation for Public Broadcasting

344

Council on Wage and Price Stability

346

Employment Service

237

Energy Information Activities

115

Energy Regulation

117

Energy Research and Development

293

Energy Sciences

119

FmHA Grant and Home Ownership Assistance

FmHA Water and Sewer Loan Levels and Interest Rates

Federal Trade Commission

352

Fish and Wildlife Service Reductions

210

Foreign Development Assistance

323

Forest Service Reductions

General Science Program

122

Health Maintenance Organizations

153

Health Planning

155

Health Professions Education

156

Higher and Continuing Education

Highway Safety (402) Grants

271

Historical Publications and Records Commission Grants

356

Improved
Targeting of Conservation
Expenditures

212

429

Page

Indian Health Service

158

Institute of Museum Services

Intergovernmental Personnel Act Grant Program

373

International Communication Agency

361

International Organizations

328

LANDSAT, Land Remote Satellite Sensing

Library Programs

Magnetic Fusion

123

Maritime Assistance, Construction and Operating Subsidies

Medical Care: Miscellaneous Reductions, VA

316

Mulitlateral Development Banks

325

National Aeronautics and Space Administration

301

National Center for Health Care Technology

161

National Consumer Cooperative Bank

364

National Endowments for the Arts and Humanities

366

National Health Service Corps

162

National Institute of Education

National Institutes of Health

164

National Science Foundation Programs

369

NOAA Ocean Programs

Office of Smoking and Health

165

Peace Corps

331

P.L. 480 — Food Aid

330

Professional Standards Review Organization (PSROs)

166

Public Health Service Hospitals and Clinics

167

Public Telecommunications Facilities Program

Railroad Retirement Board

376

Refugee Assistance

170

430

Page

Research and Technology, HUD

195

SBA; Small Items

382

School Assistance in Federally Affected
Areas (Impact Aid)

Smaller Items, Commerce

Special Milk

Special Population Programs

101

Special Supplemental Food Program for Women,
Infants, and Children

Student Loan Marketing Association

384

Surface Mining Regulation and Reclamation

217

Uranium Enrichment

134

Vocational Education

105

Wage and Price Standards Program

346

Water Resources Council/Office of Water Policy

Young Adult Conservation Corps

246

Youth Conservation Corps

219

Youth Initiative
CONSOLIDATE
GRANTS

248
CATEGORICAL

GRANT PROGRAMS INTO BLOCK

Alcohol Fuels/Biomass/Urban Waste

144

CETA: Employment and Training Grant Consolidation

231

Community Development Block Grants (CDBG) and Urban Development
Grants and Urban Development (UDAG)

182

Community Services Programs

342

Department of Energy Overhead

Ill

Elementary and Secondary Education Block Grants

Energy and Emergency Assistance Block Grant

146

Health Block Grants

148

Juvenile Justice and Delinquency Prevention Program

225

Legal Serv ices Corporation

362

431

Page

Neighborhood Self-Help Development

189

Nutrition Assistance for Puerto Rico

Rehabilitation Loan Fund

194

Social Services Block Grant

150

REDUCE 0 VERHEAD AND PERSONNEL
OF THE FEDERAL
GOVERNMENT

COSTS

Administrative Expenses, HUD

181

Architectural Transportation Barriers
Compliance Board (ATBCB)

338

Bureau of Indian Affairs, Operating and
Construction Programs

209

Davis-Bacon and Service Contracts Acts

398

Defense Savings

Executive Office of the President: Resources

348

Federal Pay Comparability Standard

396

Federal Protective Service

359

Forest Service

Justice Department: Employment

223

Medical Staffing, VA

317

Physicians' and Dentists' Bonuses

314

Reductions of Federal Civilian Employment

390

Regulatory Program Reductions (Agencywide, EPA)

294

Sale of Excess Materials from the National
Defense Stockpile

357

Superfund

295

Treasury Law Enforcement Tax Administration Staffing

287

Veterans Readjustment Counseling Centers

319

432

INDEX III
Functional Index 17
FUNCTION/SUBFUNCTIQN

PAGE

050 National Defense
051

Department of Defense-Military

71,398

053

Atomic energy defense activities

—

054

Defense-related activities

357

150 International Affairs
151

Foreign economic and financial assistance....

251,268,323, 325, 328,329, 330,331

152

Military assistance

—

153

Conduct of foreign affairs

251,323,328

154

Foreign information and exchange
activities

323,361

International financial programs

332,349

155

250 General Sciences, Space, and Technology
251

General science and basic research

301,369

253

Space flight

301

254

Science, applications, and technology

301

255

Supporting space activities

301

270 Energy
271

Energy supply

44,119,120,122,124,125,128,131,134,293

272

Energy conservation

113,196

274

Emergency energy preparedness

276

Energy information, policy regulation

109, 111, 115,117

300 Natural Resources and Environment
301

Water resources

75,76,77,78, 80

302

Conservation and land management...

27, 39, 61,66, 209,217, 219

303

Recreational resources

210,212

304

Pollution control and abatement

291,294,295,297

306

Other natural resources

59,66,214

350 Agriculture
351

Farm income stabilization

23,25,29,31

352

Agricultural research and services

36, 50

^ For dollar amounts distributed by function see the Fiscal Year 1982 Budget Revisions (March 10,1981), pages 33 through 119.

433

FUNCTION/SUBFUNCTION

PAGE

370 Commerce and Housing Credit
371

Mortgage credit and thrift insurance

31, 34,186

372
376

Postal Service
Other advancement and regulation of
commerce

374
61,66, 352,364, 378, 382

400 Transportation
401

Ground transportation

259,264,266,267,268,274,276,278,280,282

402

Air transportation

255,257,271,272, 340

403

Water transportation

57,262

407

Other transportation

—

450 Community and Regional Development
451

Community development

182,189,190,194,195

452

Area and regional development

43,46, 55,61, 336

453

Disaster relief and insurance

31, 351,380

500 Education, Training, Employment, and Social Services
501

Elementary, secondary, and vocational
education

86,93,101,105,248

502

Higher education

85,90,101,103

503

Research and general education aids

65,95,97,99, 344,366

504

Training and employment

231,233,235, 237,246,248

505

Other labor

—

506

Social services

150,188,335, 342, 384

550 Health
551

Health care services

148,153,158,159,166,169

552
553

Health research
Education and training of health care work
force
Consumer and occupational health and
safety

144,164,165

554

144,155,156,161,162,164,169
343

600 Income Security
601

General retirement and disability insurance.

167,174,176,177,229, 376

602

Federal employee retirement and disability-

238,371

603

Unemployment compensation

235,240,242,243,245

604

Housing assistance

184,192,198,199,201,203,204,206

605

Food and nutrition assistance

21, 37,41,48,49

609

Other income security

139,146,152,172,178

434

FLNCTION/SUBFUNCTION

PAGE

700 Veterans Benefits and Services
701
702

Income security for veterans
Veterans education, training, and
rehabilitation

312

703

Hospital and medical care for veterans

307,308, 309, 314, 316, 317, 319

704

Veterans housing

—

705

Other veterans beneftis and services

—

310,311

750 Administration of Justice
751

Federal law enforcement activities

223,287, 338

752

Federal litigative and judicial activities

223,362

753

Federal correctional activities

—

754

Criminal justice assistance

225

800 General Government
801

Legislative functions

—

802

Executive direction and management

346

803

Central fiscal operations

287

804

General property and records management..

354,356,359

805

Central personnel management

—

806

Other general government

348,373

850 General Purpose Fiscal Assistance
851

General revenue sharing

—

852

Other general purpose fiscal assistance

347

900 Interest
901

Interest on the public debt

—

902

Other interest

—

920 Allowances
921

Civilian agency pay raises

396,398

924

Contingencies for other requirements

248

950 Undistributed Offsetting Receipts
951

Employer share, employee retirement

—

952
953

Interest received by trust funds
Rents and royalties on the Outer
Continental Shelf

—

Multiple functions

181,389, 390

999

214

435
U.S. GOVERNMENT PRINTING OFFICE : 1981 0 - 344-211

Full text of Budget Revisions : Fiscal Year 1982 : Additional Details on Budget Savings

FRASER