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SPECIAL ANALYSES BUDGET OF THE UNITED STATES FISCAL YEAR 1 9 7 1 SPECIAL ANALYSES BUDGET OF THE UNITED STATES FISCAL YEAR 1 9 7 1 FOREWORD This volume of Special Analyses contains facts and figures on various features of the recommendations transmitted by the President in The Budget of the United States Government, 1971. The purpose of this volume is to present special analytical information about significant aspects of Government activities. This complements the detailed financial and program information which is contained in the Budget Appendix. Part 1 provides analyses and tabulations which cover Government finances and operations as a whole, and reflect the ways in which Government finances affect the economy. Part 2 furnishes Government-wide program and financial information in six social program areas—education, manpower, health, income security, crime reduction, and housing. Part S discusses trends and developments in selected areas of Government activity—aid to State and local governments, public works, and research and development. Part 4 presents the budgets of a number of the larger agencies in terms of the program categories used for program planning and evaluation in each agency. GENERAL NOTES 1. All years referred to are fiscal years, unless otherwise noted. 2. Detail in the tables, text, and charts of this volume may not add to the totals because of rounding. U.S. GOVERNMENT PRINTING OFFICE WASHINGTON : 1970 For sale by the Superintendent of Documents, U.S. Government Printing Office Washington, D.C. 20402 - Price $1.50 TABLE OF CONTENTS Page PARTI. ECONOMIC AND FINANCIAL ANALYSES A. B. C. D. E. F. G. H. 5 Federal transactions in the national income accounts Funds in the budget . Borrowing and investments Investment, operating, and other budget outlays Federal credit programs Principal Federal statistical programs Balances of budget authority Civilian employment in the executive branch ' I9 2^ 2r 6-> 8' 89 99 PART 2. FEDERAL SOCIAL PROGRAMS I. J. K. L. M. N. 10? Federal education programs Federal manpower programs _ Federal health programs.. Federal income security programs Federal programs for the reduction of crime Federal housing programs _ 111 130 147 172 194 206 PART 3. SPECIAL ASPECTS OF FEDERAL PROGRAMS 0 . Federal aid to State and local governments P. Federal public works activities Q. Federal research, development, and related programs PART 4. ANALYTIC PROGRAM STRUCTURE R. Selected agency budgets by program categories 217 219 236 255 267 269 _ 3 PART 1 ECONOMIC AND FINANCIAL ANALYSES INTRODUCTION Part 1 provides analyses and tabulations which cover Government finances and operations as a whole, and reflect the ways in which Government finances affect the economy. These special analyses encompass those designated A through H. Special Analysis A presents the Federal budget estimates in terms of the national income accounts. It is designed to explain the relationships of the unified budget of the Federal Government to the national income accounts, which constitute the most widely used measure of aggregate economic activity in the United States. Special Analysis B classifies budget information by the groups of funds (Federal and trust) which comprise the budget. It also presents aggregate data on the gross receipts and outlays of all funds. Special Analysis C summarizes current developments and trends in borrowing and in investments in U.S. Government securities made by the Treasury Department and other Federal agencies. It includes information on the potential impact of Government and Governmentsponsored programs on the capital market. Special Analysis D analyzes budget outlays in terms of the duration and nature of the benefits derived, distinguishing those of an investment or developmental type from those which primarily yield current benefits. Apart from this analysis and the distribution between the loan account and the expenditure account, the U.S. budget, unlike those of some other governments, includes outlays which are for "capital" or investment type activities in the same accounts in which "current" activities and costs are shown. Special Analysis E covers Federal credit aids—direct loans and insurance or guarantee of private loans. It includes all transactions in the loan account, and also the credit transactions which are in the expenditure account. Special Analysis F reflects the year-to-year level of activity under the principal programs of the Federal Government for collecting current statistics, and current spending for periodic statistics obtained in census-type surveys usually conducted every 5 or 10 years. Special Analysis 6 analyzes the unobligated and obligated balances of budget authority for Federal and trust funds carried forward at the end of each fiscal year. Special Analysis H deals with the levels of civilian employment in the executive branch. It also contains figures on total Federal personnel (including military personnel). SPECIAL ANALYSIS A FEDERAL TRANSACTIONS IN THE NATIONAL INCOME ACCOUNTS The budget is designed to serve many purposes: • To serve the broadest national objectives, it proposes an allocation of resources between the private and public sectors, and within the public sector; • It is an economic document that embodies the taxing and spending policies of the Government for promoting growth of the national economy, high employment, price stability, and strengthening of the Nation's balance-of-payments position; • It sets forth the President's requests to Congress for appropriation action on existing or new programs, and changes in tax legislation; and • It is a report to the Congress and the people on how the Government has spent the funds entrusted to it in past years. No single budget concept can completely satisfy all purposes. The budget document and related Treasury reports are designed to provide complete, detailed information on the finances of the Federal Government. For those concerned with aggregate economic activity in the country, however, the national income accounts (NIA) of the United States are the most widely used measures—and interest is focused heavily on the Federal sector of these accounts. This analysis is designed to explain the relationships of the budget to the Federal sector of the national income accounts, and to translate the budget estimates into national income terms. It is divided into two major sections: (1) the size and trend.s of major components in the Federal sector; and (2) the relationship between the Federal sector and the budget. FEDERAL SECTOR RECEIPTS AND EXPENDITURES Total receipts in the Federal sector of the NIA are estimated to rise by $3.6 billion between 1970 and 1971, reaching a total of $205.4 billion in 1971. Expenditures are expected to rise by $5.7 billion, amounting to $203.8 billion in 1971, and resulting in a surplus of $1.6 billion. Trends in Federal sector receipts.—The largest receipts category by far is personal tax and nontax receipts. The principal component of this group is individual income taxes, but it also includes estate and gift taxes, fines, fees, and gifts. This has been the largest category since World War II, fluctuating between 38% to 47% of total Federal sector receipts. Changes in personal tax receipts depend mainly on changes in personal incomes and on individual income tax rates. Such receipts rose from 7.7% of personal income in 1950 to 12.7% in 1954 as a result of tax increases to finance the Korean war. From 1955 through 1968, they ranged between 9.9% and 10.9% of personal income, but rose in 1969, because of the income tax surcharge, to reach 12.6% of personal income—the second highest proportion since 1948. As a result of the reduction in the surcharge in the first half of 1970 and its expiration at 8 THE BUDGET FOR FISCAL YEAR 1971 Table A-1. FEDERAL RECEIPTS AND EXPENDITURES IN THE NATIONAL INCOME ACCOUNTS (in billions of dollars) Description 1970 estimate 1971 estimate 90.5 40.0 18.6 43.6 95.5 38.8 19.1 48.3 93.6 38.4 20.5 52.9 192.7 201.8 205.4 101.1 (78.9) (22.2) 50.3 (48.2) (2.2) 18.9 12.3 4.1 100.8 (77.9) (22.8) 56.9 (54.7) (2.2) 22.4 13.6 4.5 96.9 (72.1) (24.5) 65.0 (62.8) (2.2) 24.8 13.3 4.1 186.7 198.1 203.8 +6.0 +3.6 +1.6 1969 actual RECEIPTS Personal tax and nontax receipts Corporate profits tax accruals Indirect business tax and nontax accruals Contributions for social insurance Total receipts EXPENDITURES Purchases of goods and services _ Defense _ Nondefense _ __ Transfer payments Domestic ("to persons") Foreign Grants-in-aid to State and local governments Net interest paid ___ Subsidies less current surplus of Government enterprises Total expenditures Surplus ( + ) or deficit ( - ) the end of June 1970, total personal income tax receipts will rise only slightly and will decline relative to personal income in both 1970 and 1971. The reduction in personal income tax rates for most taxpayers, under the recent tax reform bill, is expected to reduce the relative proportion even further in future years. During the period 1944 through 1966, corporate profits tax accruals constituted the second largest receipt category, supplying, on balance, about half as much revenue as personal taxes. This category differs from what the budget shows as corporation income taxes because of two factors: (1) the budget records cash receipts while the Federal sector records corporations' tax liabilities, and (2) deposits of earnings of the Federal Reserve System are included in NIA corporate profits while the budget treats these as miscellaneous receipts. Over the past two decades corporate profits tax accruals have fluctuated widely as a percent of corporate profits. In the 1952-54 period they averaged more than 5 1 % of corporate profits; from 1955 through 1967 they ranged from 34% to 50%, averaging less than 39% for the period as a whole. The income tax surcharge raised 1968 corporate taxes to more than 45% of corporate profits. While the expiration of the surcharge at the end of June 1970 will reduce these taxes, the repeal of the investment tax credit and certain other provisions of the recent tax reform bill will offset part of the reduction. Indirect business tax and nontax accruals consist primarily of excise taxes, customs duties, and Federal receipts on rents and royalties. Over the past 20 years, this category has decreased in importance as a source of revenues. For the period 1946 through 1950, they provided about 19% of total Federal sector receipts; from 1951 through 1965 SPECIAL ANALYSES they averaged only 14% of total Federal sector receipts; while from 1966 through 1969 they were less than 11%. While excise taxes in general have become less important as a source of receipts, those that are levied as user charges are an increasing part of the total. The principal example of this is the highway trust fund, which currently accounts for about one-fourth of indirect business taxes. The proposed aviation user charges will also add receipts to this category. Contributions for social insurance constitute the final category of receipts. As the table below indicates, these are becoming an increasingly important portion of Federal sector receipts. Table A-2. SOCIAL INSURANCE CONTRIBUTIONS, PERSONAL INCOME, AND TOTAL FEDERAL SECTOR RECEIPTS, SELECTED YEARS (dollar amounts in billions) Fiscal year Personal income 1 1946 1951 1956 1961 1966 1969 1970 estimate. 1971 estimate. 172 243 323 406 564 718 775 NA Total Federal sector receipts 38.4 60.8 75.8 95.3 132.8 192.7 201.8 205.4 Contributions for social insurance 5.8 6.6 10.2 18.1 28.5 43.6 48.3 52.9 Contributions as percent df— Personal income 2.4 2.7 3.2 4.5 5.1 6.1 6.2 NA Total Federal sector 15.1 10.9 13.5 19.0 20.4 22.6 23.9 25.8 1 Average of seasonally adjusted quarters. NA=Not available. In 1967, social insurance contributions exceeded corporate profits tax accruals, and thus became the second largest category of Federal sector receipts. As table A-3 shows, there are three main growth areas in the social insurance group: Old-age, survivors, and disability insurance (OASDI), civil service retirement, and the health insurance trust funds. Growth of OASDI receipts results from larger numbers of insured taxpayers, higher rates of taxation, and a rising tax base. The civil service retirement fund is financed by employer and employee contributions. The hospital and supplementary medical insurance funds are relatively new, but are characterized by rapid growth, because of both expansion of coverage and higher rates. These higher rates are required because of the particularly rapid growth in utilization and costs in this area. The general fund makes contributions to both of these funds, but such contributions are not classified as social insurance contributions. There is some growth under the other retirement and disability category, which is mainly railroad retirement receipts, while the veterans insurance contributions (mainly the National Service Life Insurance fund) are quite stable. The remaining category—unemployment insurance—declined from a high of $4.1 billion in 1963 to the current level of $3.4 billion. These receipts finance the benefit 10 THE BUDGET FOR FISCAL YEAR 1 9 7 1 payments and administrative costs under the Federal-State unemployment insurance program. Table A-3. COMPOSITION OF CONTRIBUTIONS FOR SOCIAL INSURANCE (in billions of dollars) Retirement and disability Fiscal year I960 1961 1962 1963 1964 1965 1966 1967 1968 1969 l970estimate____ 1971 estimate____ Total social insurance Old-age, survivors, and disability insurance 16.7 18.1 19.9 22.1 23.5 24.6 28.5 35.8 38.0 43.6 48.3 52.9 11.2 12.2 13.5 14.8 16.5 17.3 20.3 25.0 26.4 30.5 34.3 36.8 Civil service r etirement 1.5 1.7 1.8 1.9 2.1 2.2 2.3 2.5 2.7 2.9 3.3 3.5 Other i 0.7 .6 .7 .7 .7 .7 .8 .8 .9 .9 1.0 1.1 Hospital and supplementary medical insurance 0.9 3.3 4.2 5.5 5.8 7.6 Unemployment insurance (includes RRUI) 2.8 3.0 3.3 4.1 3.8 3.8 3.8 3.7 3.3 3.4 3.4 3.4 Veterans life insurance 0.5 .6 .6 .6 .6 .6 .6 .5 .5 .5 .5 .5 i Mainly railroad retirement. Trends in Federal sector expenditures.—Federal sector expenditures, like receipts, are divided into several major groupings, depending upon the nature of the transaction. The primary division is between purchases of goods and services (chiefly for defense) and all other transactions. Purchases represent that portion of the Nation's output that is bought directly by the Federal Government; the other categories consist primarily of transfers of income to other groups which, in turn, can be used to finance the purchase of goods and services. As the accompanying chart illustrates, there have been significant shifts in the relative size of the various Federal sector expenditure components over the past two decades. The chart shows the trend of Federal sector expenditures as a percent of gross national product (GNP). Since our population continues to grow, some increase in the demand for governmental services would be expected. In addition, price and cost increases have led to higher expenditures. The comparison of Federal sector expenditures with GNP provides a reasonable adjustment for these factors. Table A-7 provides the basic data used in the chart. Defense purchases of goods and services.—This is the largest single component of Federal sector outlays, including most of the expenditures of the Department of Defense, the military assistance program, the Atomic Energy Commission, and other defense-related activities. Defense purchases have fluctuated widely in the past three decades, varying with the state of international tensions. At the peak of World War II, they constituted over 40% of GNP—yet in 4 years they dropped to less than 4% of the total. The Korean war raised defense purchases to 13%% of GNP in 1953, with subsequent declines during most of the following 13 years. The Vietnam war in 11 SPECIAL ANALYSES Federal Sector Expenditures Relative to Gross National Product Ptretnt 25- 1951 1953 Fiscal Yean 1955 1957 (959 1961 (963 1965 1967 (969 Estimate 1967 and 1968 increased the proportion of GNP going to defense purchases, but this proportion dropped in 1969 and the decline is expected to continue through 1971. Nondefense purchases of goods and services.—This category covers the goods and services consumed by Federal civilian operations including such programs as maintenance of national forest, park, and recreation areas; space exploration; promotion of commerce; construction of flood control and navigation projects; operation of the Federal airway system; a wide variety of medical and other scientific research; Federal law enforcement activities; and maintenance of veterans hospitals. Nondefense purchases varied considerably as a proportion of GNP during the decade from 1951 through 1960; they rose from 1.6% of GNP in 1960 to 2.4% in 1964, largely as a result of expansion of 12 THE BUDGET FOR FISCAL YEAR 197.1 purchases to finance the space program. Since that time nondefense purchases have been a very stable proportion of GNP. Domestic transfer payments.—This is the largest category of Federal sector expenditures that affect the distribution of national income without constituting a direct Federal consumption of resources. Spending in these programs has expanded rapidly largely because of a higher number of beneficiaries and higher benefit payments under the social insurance programs. Around two-thirds of the payments are for retirement and disability, with the Old-Age and Survivors Insurance fund (OASI) constituting nearly 70% of retirement and disability payments and around one-half of all domestic transfer payments. Other major components of this category are civil service retirement, railroad retirement, disability insurance, and military retired pay. The growth in these programs in 1970 and 1971 is due partly to liberalized benefits and expanded coverage, and particularly to the increases enacted in the most recent session of Congress. Table A-4. DOMESTIC TRANSFER PAYMENTS (in billions of dollars) Fiscal year 1960 1961 1962 1963 1964 1965 1966 1967.... 1968... 1969 1970 estimate. 1971 estimate. Total 20.6 23.6 25.1 26.4 27.3 28.3 31.8 37.3 42.4 48.2 54.7 62.8 Retirement and disability 13.1 14.4 16.4 18.0 19.1 20.2 23.9 25.3 27.9 31.8 35.7 40.4 Hospital and supplementary medical insurance 3.2 5.1 6.3 7.2 8.4 Veterans insurance and benefits Unemployment benefits 4.4 4.6 4.6 4.7 4.6 4.7 4.7 5.3 5.5 6.1 6.8 7.0 2.7 4.2 3.6 3.1 2.9 2.5 2.1 2.1 2.2 2.3 3.0 3.4 All other 0.3 .4 .5 .5 .6 .8 1.1 1.3 1.6 1.7 2.1 3.5 The second largest group of domestic transfer payments is for medical care under the hospital and supplementary medical insurance programs. There were no benefit payments under these programs prior to the introduction of Medicare in 1967, but by 1971, they are expected to reach $8.4 billion. A much older, but less rapidly expanding, group of transfer payments is veterans benefits. The principal growth since 1968 is due to enactment of educational benefits for veterans serving since the Korean war. Unemployment benefits constitute another major category of domestic transfer payments. Changes in the level of these payments are determined primarily by changes in the level of insured unemployment. In 1971, these outlays are expected to rise to $3.4 billion, but as table A-4 shows, this is still lower than in 1961 despite the substantially larger labor force. Current Federal efforts to reduce deprivation and malnutrition have resulted in two significant growth items—the proposed welfare reform program and the food stamp program. Traditional Federal Government outlays for welfare have taken the form of grants-in-aid 13 SPECIAL ANALYSES to States. The proposed welfare reform will result in substantially increased Federal outlays in the near term. Some of these outlays will be direct Federal transfer payments to individuals—amounting to $0.5 billion starting in 1971—while the bulk of the funds will still be classified as grants-in-aid. Similarly, the food stamp program is being expanded rapidly. In 1967, food stamps provided $0.1 billion of domestic transfers; by 1971, they are expected to total $1.2 billion. Grants-in-aid.—This group of outlays is composed of many programs designed either to assist State and local governments to provide public services or else to assist their financing of benefit programs for needy people. The largest expenditures in this category are for public assistance, Medicaid, and vocational rehabilitation. As table A-5 shows, spending for these programs rose from $2.1 billion in 1960 to $5.6 billion in 1968 and an estimated $8.0 billion in 1970. In 1971 these grants are expected to total $9.1 billion. Table A-5. FEDERAL G R A N T S - I N - A I D (in billions of dollars) Fiscal year Total Public assistance and Education Community I960 1961 _ 1962 .- . 1963 . . . . -_ . 1964 1965 1966 „. 1967 1968 1969 1970 estimate. 1971 estimate 1 6.8 6.9 7.6 8.4 9.8 10.9 12.7 14.8 17.6 18.9 22.4 24.8 2.1 2.2 2.5 2.8 3.0 3.2 3.7 4.4 5.6 6.6 8.0 9.1 Other housing rehabilitation 1 0.7 .8 .9 .9 1.0 1.4 2.4 3.5 4.2 4.2 4.3 4.6 3.0 2.6 2.8 3.0 3.7 4.1 4.0 4.0 4.3 4.4 4.7 4.8 0.1 .1 .2 .2 1.0 1.1 1.2 1.4 .2 1.8 .4 .4 .6 .6 .7 1.6 1.9 2.0 2.1 2.3 2.9 3.0 3.8 4.4 I 1 Includes Medicaic^. A second type of grant is for education and manpower. The three largest categories of education grants are for elementary and secondary education (which are focused heavily on economically deprived areas), higher education, and Federal aid to impacted areas (for school districts with children of Federal civilian or military personnel). Emphasis is being given by the Government to improve the delivery of educational services and the use of manpower training programs as instruments for moving people from welfare rolls to productive employment. Transportation has been a major component of grant outlays since the mid-1950's. The highway trust fund has been highly successful in developing a nationwide system of roads that is unsurpassed in the world. While progress toward completion of this system is continuing, the basic focus of expansion in the transportation field is now concentrated in two other areas: aviation and urban mass transit. The vast expansion of air travel in recent years has greatly strained the capacity of our national airport and airway system. The Government is vigor 14 THE BUDGET FOR FISCAL YEAR 1971 ously pursuing a planned increase in outlays for aviation—including significant grants for airport construction. These outlays aie to be financed by user charges rather than by the general taxpayer. The community development and housing area is receiving increasing assistance from Federal grants. While the vast majority of urban construction is provided and financed privately, there are key public facilities such as water systems, waste treatment plants, slum clearance, open space and recreation facilities, that have received and are receiving large infusions of Federal money. Another notable expansion of grant expenditures is for crime prevention. This program provides funds for a wide range of improvements in local law enforcement and criminal justice activities. A more detailed analysis of grants-in-aid programs is presented in Special Analysis O of this budget. The definitions of grants are not the same for that analysis as they are for the NIA, but most of the programs are common to both. The principal differences between the Special Analysis O and the NIA grants are: (1) Special Analysis O includes some outlays (mainly for food stamps, the Office of Economic Opportunity, and hospital construction) that the NIA treats as transfer payments; (2) Special Analysis O excludes payments for research, while the NIA includes research payments to public universities as grants; and (3) Special Analysis O includes aid in kind, while the NIA grants are only cash payments. Other Federal sector expenditures,—Three categories—net interest paid, foreign transfer payments, and subsidies less current surplus of Government-sponsored enterprises—complete the Federal sector expenditures. The principal growth in recent years is for net interest paid. This growth has been caused in part by a larger outstanding debt, but primarily by higher interest rates. Foreign transfer payments are mainly of three types—expenditure of dollars to assist economic development programs, grants of foreign currencies that are earned from sale of surplus agricultural products, and payments to individuals living abroad for social security and similar programs. Although payments to individuals are gradually rising (roughly proportionate with the rise in GNP), total foreign transfer payments have been stable (and a declining proportion of GNP) for many years. Subsidies less current surplus of Government enterprises consists of two elements that are consolidated for statistical reasons: (a) Subsidy payments to resident businesses; and (b) the "current surplus" or "deficit" of Government enterprises. (a) A subsidy is a monetary grant to a unit engaged in commercial activities (mainly businesses and farms). Examples of subsidies are Government payments to farmers for land retirement, payments to air carriers, and the operating differential subsidy of the Maritime Administration. (b) Government enterprise is the term applied to those functions of the Government (usually appearing in the budget as public enterprise revolving funds) for which operating costs are to a great extent covered by the sale of goods and services to the public, as distinguished from those financed by tax receipts. Government enterprises conduct operations that are of a business-type nature. The difference between their sales and current operating expenses constitutes the 15 SPECIAL ANALYSES surplus or deficit of Government enterprises. The largest of these enterprises are the Commodity Credit Corporation (CCC), the Post Office, and the Tennessee Valley Authority. RELATIONSHIP OF THE BUDGET TO THE FEDERAL SECTOR OF THE NATIONAL INCOME ACCOUNTS Conceptually, the national income accounts include all the Nation's current income and production activities, and do not measure transactions—such as loans—that represent an exchange of assets rather than income or production. Loan transactions have a significant economic impact, affecting both income and output, but they are best analyzed as part of credit rather than fiscal policy. Special Analysis C (Borrowing and Investment) and Special Analysis E (Federal Credit Programs) are both designed to facilitate a study of the financial market implications of the budget. Budget outlays are divided into two major segments—the expenditure account and the loan account. All transactions included in the loan account are excluded from the Federal sector, so this discussion focuses exclusively on how the Federal budget expenditure account relates to the Federal sector account. Table A-6 shows the major differences between the budget and the Federal sector estimates. These differences are explained in the following paragraphs. Table A-6. RELATIONSHIP OF THE BUDGET TO THE FEDERAL SECTOR, NIA (in billions of dollars) Description 1969 1970 1971 RECEIPTS Total budget receipts Government contribution for employee retirement (grossing) _ ____ Other netting and grossing _ Adjustment to accruals Other Federal sector, NIA receipts 187.8 199.4 202.1 21 1.3 1.7 -.2 2.4 1.4 -.9 -.4 2.6 1.4 -.5 -.2 192.7 201.8 205.4 184.6 197.9 200.8 -1.5 -1.0 -2.9 -1.8 — 7 -1.9 2.1 1.3 .7 -.3 .9 2.4 1.4 1.7 -.3 -.2 2.6 1.4 1.3 -.2 .5 186.7 198.1 203.8 EXPENDITURES Total budget outlays Loan account Financial transactions in the expenditure account Government contribution for employee retirement (grossing') _ Other netting and grossing - Defense timing adjustment -Dollar expenditures tofinanceagricultural exports Other -_ Federal sector, NIA expenditures Lending and financial transactions.—The loan account in the budget includes only those domestic credit transactions where there are def 16 THE BUDGET FOR FISCAL YEAR 1971 inite requirements for full repayment of the loans, plus all foreign loans made on commercial terms. Credit programs that do not meet these requirements are included in the expenditure account. The Federal sector, however, excludes not only all lending transactions included in the loan account, but also some financial transactions included as expenditures in the budget—such as foreign loans of the Agency for International Development, and tobacco and foreign loans in the Commodity Credit Corporation (CCC). Certain credit transactions in the expenditure account—like most CCC nonrecourse commodity loans—are treated as purchases of goods under the national income accounts concept. Government contribution for employee retirement.—The Civil Service and Foreign Service Retirement programs are financed by employer and employee contributions. Retirement benefits under these programs are recorded as expenditures in the budget and as transfer payments in the Federal sector accounts. The contributions of Government agencies, as employers, to these retirement trust funds are deducted from total budget expenditures since these contributions represent intragovernmental transactions. However, the NIA considers Government payments for employee retirement to be part of the compensation paid to Government employees who, in turn, make their trust fund contributions. Therefore, the Federal sector includes the Government's contributions to employee retirement funds in both receipts and expenditures. Likewise, contributions by the Government on behalf of its employees who are covered by the old-agje, survivors, disability, and health insurance programs are included in Federal sector receipts and expenditures. These adjustments affect total receipts and expenditures equally and thus do not alter either the budget or Federal sector surplus or deficit. Other netting and grossing.—The budget normally counts as receipts only income from taxation or revenues due to the exercise of governmental power to compel payment. Money received in the course of business-type transactions, therefore, are normally shown as offsets against expenditures. For instance, receipts from two major insurance programs operated by the Veterans Administration (National Service Life Insurance and U.S. Government Life Insurance) are netted against expenditures in the budget since these programs are voluntary, commercial-type activities. However, in the NIA, the receipts are treated in the same way as receipts from compulsory Government insurance programs. These adjustments also affect total receipts and expenditures equally and thus do not alter either the budget or Federal sector surplus or deficit. Timing adjustments.—The budget records receipts at the time the cash is collected regardless of when the income is earned; expenditures (except interest) are generally recorded at the time the checks are issued. The NIA attempts to record most receipts in the time period in which the income is earned rather than when taxes are actually paid. For instance, corporate income taxes in the NIA are recorded as taxes when the profits are earned (accrued) regardless of when the cash is received by the Treasury. The principal timing adjustment on the expenditures side is for defense purchases. Procurement items (such as ships or airplanes) are 17 SPECIAL ANALYSES recorded in the Federal sector as defense purchases at the time of delivery to the Federal Government rather than when they are fabricated or when they are paid for; work in process is counted as part of private business inventories until the articles are completed and delivered to the Government. Both the budget and the Federal sector record public debt interest when it accrues. Dollar expenditures to finance agricultural exports.—The Commodity Credit Corporation facilitates the export of agricultural products by accepting foreign currencies in payment for such commodities. This expendituie of dollars is included in the budget but excluded from the Federal sector on the ground that it is an exchange of financial assets: Dollars for foreign currencies. When the foreign currencies thus acquired are spent, they are then counted as Federal sector expenditures. Other.—This category includes some miscellaneous adjustments, largely for certain specialized aspects of the national income accounts, such as purchase and sale of land, which are included in the budget but not in the national income accounts. Certain nondefense timing adjustments are included here because of the difficulty in separating them from other adjustment categories. It also includes adjustments for the expenditure of foreign currency acquired as described in the preceding paragraph. The following tables provide additional basic data relevant to the Federal sector. Table A-7. GNP AND FEDERAL SECTOR EXPENDITURES AS A PERCENT OF GNP (in bUIions of dollars) Federal sector expenditures as a percent of GNP Fiscal year 1951 1952 1953 1954 1955 1956 1597 1958 1959 I960 1961 1962 1963_ 1964 1965 __ . _ . .-_.- 1966 ._ 1967 1968 1969 1970 estimate http://fraser.stlouisfed.org/ 390-700 O—70 Federal Reserve Bank of St. Louis Total GNP (in billions of dollars) Total expenditures Defense Nondefense 310.5 337.2 358.9 362.1 378.6 14.4 19.6 21.1 20.5 17.8 7.0 12.4 13.6 12.6 10.2 1.1 1.4 2.0 2.1 1.4 2.6 2.5 2.6 2.9 3.2 0.8 .7 .8 .8 .8 2.9 2.5 2.2 2.1 2.2 409.4 431.3 440.3 469.1 495.2 17.0 17.6 18.9 19.4 18.4 9.6 9.8 10.2 9.9 9.1 1.5 1.2 1.3 1.8 1.6 3.1 3.3 4.0 4.2 4.2 .8 .9 .1 .3 .4 2.1 2.3 2.2 2.2 2.2 506.5 542.1 573.4 612.2 654.2 19.3 19.6 19.4 19.1 18.1 9.2 9.3 8.8 8.3 7.5 1.7 1.9 2.3 2.4 2.4 4.7 4.6 4.6 4.5 4.3 .4 .4 .5 .6 .7 2.4 2.4 2.3 2.3 2.3 721.2 768.8 828.0 900.6 960.0 18.3 20.1 7.5 8.8 9.1 8.8 8.1 2.4 2.3 2.4 2.5 2.4 4.4 4.8 5.1 5.3 5.7 .8 9 U U \J.3 2.2 2.2 2.1 2.1 2.1 20.8 20.7 20.6 Purchases Domestic Grantstransfer in-aid payments AH other Table A-8. FEDERAL TRANSACTIONS IN THE NATIONAL INCOME ACCOUNTS, 1960-1971 (in billions of dollars) 1 Actual Description Esti mate 1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 42.5 22.3 13.2 16.7 43.6 20.3 13.3 18.1 47.3 22.9 14.2 19.9 49.6 23.5 15.0 22.1 50.7 25.7 15.6 23.5 51.3 27.7 16.9 24.6 57.6 31.0 15.7 28.5 64.4 31.1 16.1 35.8 71.3 34.3 17.2 38.0 90.5 40.0 18.6 43.6 95.5 38.8 19.1 48.3 93.6 38.4 20.5 52.9 94.8 95.3 104.2 110.2 115.5 120.5 132.8 147.3 160.9 192.7 201.8 205.4 101.1 (78.9) (22.2) 50.3 (48.2) (2.2) 18.9 12.3 96.6 100.8 (77.9) (72.1) (22.8) (24.5) 56.9 65.0 (54.7) (62.8) (2.2) (2.2) 22.4 24.8 13.6 13.3 RECEIPTS, NATIONAL INCOME BASIS Personal taxes and nontaxes Corporate profits tax accruals Indirect business tax and nontax accruals Contributions for social insurance -_ Total receipts, national income basis EXPENDITURES, NATIONAL INCOME BASIS Purchases of goods and services Defense Nondefense _ __ _ Transfer Davments Domestic ("to persons") Foreign _ Grants-in-aid to State and local governments Net interest paid Subsidies less current surplus of Government enterprises 71.7 64.4 55.5 63.4 95.3 85.3 52.7 60.9 65.7 (45.0) (46.7) (50.5) (50.4) (50.9) (48.9) (54.4) (67.7) 75.8 (8.9) (10.4) (13.0) (14.7) (15.5) (17.3) (17.6) 19.5 39.4 27.2 44.5 34.2 30.5 25.6 28.5 29.5 (20.6) (23.6) (25.1) (26.4) (27.3) (28.3) (31.8) (37.3) (42.4) (1.8) (2.1) (2.1) (2.1) (2.2) (2.2) (2.3) (2.2) (2.1) 14.8 7.6 17.6 12.7 10.9 6.9 8.4 9.8 __ __ 6.8 &f __ Total expenditures, national income basis _ _ Excess of receipts ( + ) or expenditures (—), national income basis. 1 7.0 2.3 6.8 3.2 6.8 3.8 7.5 3.6 8.1 3.8 8.5 4.1 9.0 4.5 9.9 5.1 10.8 4.1 91.3 98.0 106.4 111.4 116.9 118.5 131.9 154.6 172.4 +3.5 -2.7 -2.1 -1.2 -1.4 +2.0 +.9 - 7 . 2 -11.5 4.1 186.7 4.5 4.1 198.1 203.8 +6.0 +3.6 +1.6 A reproduction of table 18, part 5, of the Budget Document. Source.—Actual data for 1960-69 are based on the estimates prepared by the Department of Commerce. Data for 1970 and 1971 are based on estimates by the Bureau of the Budget in cooperation with the Department of Commerce. SPECIAL ANALYSIS B FUNDS IN THE BUDGET This analysis classifies budget information by the groups of funds which comprise the budget. It also presents information on the gross receipts and expenditures of all funds in the aggregate. BREAKDOWN OF TOTALS, BY FUND GROUPS Table B-l shows the breakdown of total budget receipts and outlays between the Federal funds and the trust funds. The two groups together, after deducting for transactions that flow between them, make up the budget totals. Table B-l. BUDGET RECEIPTS AND OUTLAYS, BY FUND GROUP (in millions of dollars) Description 1969 actual 1970 estimate 1971 estimate RECEIPTS Federal funds: Total in fund accounts _ Interfund transactions Proprietary receipts from the public Receipts, Federal funds Trust funds: Total in fund accounts _. Interfund transactions.. ._ Proprietary receipts from the public Receipts, trust funds _ _ Intragovernmental transactions _ Total budget receipts 146,211 -644 -2,238 152,647 -827 -2,241 152,250 -1,064 -3,586 143,329 149,579 147,600 54.237 -523 -1,705 60,422 -542 -1,739 66,385 -580 -1,698 52.009 58,141 64,107 -7,547 -8,335 -9,605 187,792 199,386 202,103 151.700 -644 -2,238 159,771 -827 -2,241 159,587 -1,064 -3,586 148,819 156,703 154,936 45,512 -523 -1,705 51.798 -542 -1,739 57,718 -580 -1,698 43,284 49,517 55,440 -7.547 -8,335 -9,605 184,556 197,885 200,771 3,236 1,501 1,331 OUTLAYS Federal funds: Total in fund accounts Interfund transactions. Proprietary receipts from the public _ Outlays, Federal funds Trust funds: Total in fund accounts Interfund transactions _ Proprietary receipts from the public Outlays, trust funds Intragovernmental transactions Total budget outlays Budget surplus FEDERAL FUNDS The Federal funds are those which the Government administers as owner (as distinguished from those administered in a trustee or 19 20 THE BUDGET FOR FISCAL YEAR 197,1 fiduciary capacity). There are four subgroups of Federal funds—the general fund, special funds, public enterprise funds, and intragovernmental revolving and management funds. Table B-2. FEDERAL FUND RECEIPTS AND OUTLAYS (in millions of dollars) Description 1969 actual 1970 estimate 1971 estimate RECEIPTS BY SOURCE Individual income taxes.. Corporation income taxes Excise taxes Estate and gift taxes. _ Customs duties _ _ _ Miscellaneous receipts _ _ __ _ Total receipts Federal funds 87,249 36,678 10,585 3,491 2,319 3,008 92,200 37,000 10,872 3,500 2,260 3,747 91,000 35,000 12,059 3,600 2,260 3,681 143,329 149,579 147,600 276 108 31 340 124 39 367 130 45 1,781 1.813 1,269 8,342 857 77,875 1,252 15,382 1,558 816 1.700 1,841 1.327 8.419 1,078 76,504 1,257 17.324 2,776 1,168 1,640 1,285 1,284 7,952 1,015 71,190 1,400 19,867 3,317 902 515 690 920 422 743 811 1,749 OUTLAYS BY AGENCY Legislative Branch The Judiciary Executive Office of the President Funds appropriated to the President: Economic assistance Economic opportunity Other _ Agriculture Commerce Defense—Military Defense—Civil Health, Education, and Welfare Housing and Urban Development - _ Interior Justice ____ _ Labor Post Office State Transportation ._ Treasury Atomic Energy Commission General Services Administration National Aeronautics and Space Administration Veterans Administration Other independent agencies. Allowances for: Revenue sharing Civilian and military pay increases Contingencies -. .- - 1,820 17,013 2,450 985 430 382 454 2,208 19.193 2.461 2,618 19,154 2,411 1,247 28 424 454 4,248 7.459 1.496 3.886 8,402 2,495 3,400 8,197 2,591 175 300 1.400 275 900 Total outlays Federal funds 148,819 156,703 154,936 Excess of outlays (—) -5,489 -7,124 -7,337 Note.—Excludes extraordinary outlays or credits (—) relating to purchase and redemption of securities of enterprises converted in 1969 from mixed-ownership to private corporations, as follows: 1969, $22 million; 1970, — $18 million. Excludes charges resulting from reclassification in 1970 of certificates of interest issued by the Commodity Credit Corporation, $1,583 million. Also excludes transfers to the Federal National Mortgage Association in 1969, $75 million. Receipts and outlays.—The receipts of the general and special funds in 1971 are estimated at $148 billion, as presented in table B-2. Outlays of all the Federal funds, are estimated at $155 billion, distributed as shown. The proprietary receipts of the general fund 21 SPECIAL ANALYSES and special funds, the interfund receipts, and the receipts of the public enterprise funds and the intragovernmental funds, have all been offset in arriving at the outlays for each agency. Obligations.—The obligations (net) for Federal funds are estimated at $163.1 billion for 1971, as set forth in table B-3. These transactions largely flow from the budget authority of $163.4 billion for the year, although in p>art the obligations were authorized by prior years' budget authority. Table B-3. OBLIGATIONS INCURRED, NET, IN FEDERAL FUNDS (in millions of dollars) 1969 actual 1970 estimate 1971 estimate BY AGENCY Legislative Branch _ _ The Judiciary _ Executive Office of the President Funds appropriated to the President Agriculture Commerce ___ _ Defense—Military Defense—Civil Health, Education, and Welfare Housing and Urban Development Interior _ Justice _. Labor Post Office State. Transportation Treasury _ Atomic Energy Commission General Services Administration _ National Aeronautics and Space Administration. Veterans Administration _. Other independent agencies Allowances for: Revenue sharing < __ Civilian and military pay increases Contingencies Total. 292 108 31 4,676 9,644 963 76,755 1,216 15,876 1,796 1,011 533 713 1,114 411 1,922 16,939 2,603 347 4,040 7,574 1.277 149,841 344 125 39 5,101 7,441 1,116 77,422 1,225 17,264 385 130 46 4,569 7,916 1.149 71,708 1,523 4,305 20,095 3.899 392 4,045 8,408 4,034 8,277 7,052 1,661 838 1,075 1,405 439 2,364 19,131 2,621 1.533 1.124 1,852 667 474 2,801 19.071 2.363 194 3,351 175 500 275 1,400 1.200 161,469 163,058 Balances of prior authority.—Table B-4 shows the balances of budget authority carried forward in Federal funds at the end of each fiscal year. To the extent that valid Government obligations have been incurred and remain unpaid, amounts sufficient to pay them may be carried over into the next year. Unobligated balances may be carried forward in accordance with specific provisions of law, usually in order to permit completion of projects as contemplated at the time the appropriations were first made, but also to provide funding for activities of a continuing nature (such as business-type enterprises) or for standby emergency purposes (such as1 backup for insurance of the Federal Deposit Insurance Corporation). 1 For a more detailed review of balances, see Special Analysis C, Balances of Budget Authority. 22 THE BUDGET FOR FISCAL YEAR 197,1 Table B-4. FEDERAL FUND BALANCES OF BUDGET AUTHORITY (in millions of dollars) Start 1969 Obligated Legislative Branch 26 The Judiciary 11 Executive Office of the President _ Funds appropriated to the President: International financial institutions 1,226 Military assistance 1,371 Economic assistance: 3,671 Office of Economic Opportunity 982 Other 645 Agriculture 5,556 Commerce 1,087 Defense—Military 30,875 Defense—Civil 331 Health, Education, and Welfare __. 7,766 Housing and Urban Development __. 17,568 Interior 923 Justice 38 Labor _. 466 Post Office 620 State 62 Transportation 686 101 Treasury 1,115 Atomic Energy Commission General Services Administra208 tion National Aeronautics and 1,614 Space Administration 699 Veterans Administration 3 Civil Service Commission 2,996 Export-Import Bank Federal Deposit Insurance Corporation Federal Home Loan Bank 61 Board 1,313 Other independent agencies Allowances for contingencies TotaL End 1971 End 1970 End 1969 Department or other unit Unobligated Obligated Unobligated 46 32 11 52 * Obligated Unobligated Obligated Unobligated 54 12 41 6,427 1,585 6,633 1,834 6,839 2,254 1,280 5 1,299 5 1,346 703 3,211 576 2,923 418 3,052 6,839 5 1,007 1,182 663 112 838 5,890 1,304 5,864 125 1,357 1,223 30,415 10,314 30,933 243 388 264 5 425 1,829 145 8,848 11 422 8,261 223 8 111 2,566 251 14,805 233 1,075 5 615 167 6,865 1,783 1,184 226 29,501 14,893 296 278 959 8,099 12,562 461 32 332 21 18 796 10 385 36 12 707 8,033 49 464 17,490 13,533 9,070 13,228 9,708 12,148 590 2,241 3,548 385 1,610 1,117 41 39 290 37 151 55 346 1,184 349 363 471 735 84 1,247 961 51 803 3 2 74 13 54 45 783 1,381 3,407 814 1,199 1,043 -3 -7 140 12 137 115 1,380 1,428 1,268 68 235 168 21 1,514 380 1,405 331 1,564 817 1,481 896 1,984 809 1,691 5 4 4 3 4 3 2,687 2,818 2,569 3,562 1,174 5,052 1,674 4 3,000 3,000 380 130 355 3,000 324 3,000 3,697 52 3,990 -19 7,223 -29 2,096 1,288 1,677 1,483 975 1,591 500 200 7,350 550 72,024 54,961 172,688 54,548 77,022 49,099 82,541 51,065 *Less than $500 thousand. » Deficiencies brought forward of $7 million at start of 1969 and $14 million at start of 1970 have been offset against balances brought forward. PUBLIC ENTERPRISE FUNDS The public enterprise funds are a subgroup of Federal funds, and data thereon are included on a net basis in tables B-2 through B-4. The public enterprise funds carry on a cycle of business-type operations, primarily with the public, on behalf of the Government. Some are incorporated enterprises; others are unincorporated. The general fund 23 SPECIAL ANALYSES usually supplies them with capital, although in a few cases they may borrow from the public. Receipts and outlays.—Receipts of public enterprise funds are estimated at $24,581 million in 1971, and gross outlays are planned to total $31,411 million ftable B-5), resulting in net outlays of $6,830 million. The Commodity Credit Corporation and the postal fund are the largest enterprises, together accounting for slightly over half of the business of this subgroup of funds. Table B-5. PUBLIC ENTERPRISE FUND TRANSACTIONS (in Gross outlays Applicable receipts Description Funds appropriated to the President: Economic assistance Other Agriculture: Commodity Credit Corporation 1 . Farmers Home Administration Federal Crop Insurance Corporation Commerce - __ Defense: Military Civil (Panama Canal Company) . Health, Education, and Welfare.... Housing and Urban Development: College housing loan fund Urban renewal fund Low-rent public housing fund Government National Mortgage Association _ _ Federal Housing Administration-. Other _ _ _ Interior Labor Post Office. _ Transportation Treasury ._ _ _ General Services Administration Veterans Administration Other independent offices: Export-Import Bank Farm Credit Administration Federal Home Loan Bank Board: Federal Savings and Loan Insurance Corporation Other Small Business Administration.._ Tennessee Valley Authority United States Information Agency Total... Receipts from the public Receipts from other accounts million, of dollars) 1970 estimate 1971 estimate 935 460 925 297 873 174 5.110 3.560 8.247 1,817 9,485 2,601 8,809 2,811 48 155 51 121 55 166 52 130 51 91 10 167 23 14 174 38 15 182 39 23 159 122 28 177 141 22 188 157 139 315 278 147 419 144 448 612 422 341 887 630 372 1.468 1.069 294 1.530 1.068 1.652 1.684 63 1.360 59 1,533 58 1.652 1.819 102 1,654 123 1.790 130 49 284 47 345 49 348 92 280 131 341 112 345 6,353 24 * * 701 6.686 28 2 2 744 7,857 29 2 2 1,074 7.273 168 * * 799 7,933 184 2 1 845 8.238 306 2 2 705 1.596 96 1.738 4 1.953 4 1.842 4 2,339 4 2,148 4 362 20 317 430 222 521 345 512 166 23 353 554 74 19 416 617 68 521 602 736 44 * * * * 20,600 22,758 28,997 32,229 1969 actual 1970 estimate 1971 estimate 104 235 195 269 167 316 3.918 1.549 5.789 2.283 47 184 24,581 1969 actual 28 508 979 31,411 (17.453) (19.837) (21.610) (3.147) (2.921) (2.971) •Less than $500 thousand. 1 Includes advances from foreign assistance and special export programs of $830 million in 1969, $921 million in 1970. and $933 million in 1971. 24 THE BUDGET FOR FISCAL YEAR 1(97,1 TRUST FUNDS The trust funds are administered in a fiduciary capacity by the Government. They include one subgroup, trust revolving funds, which, like the public enterprise funds, carry on a businesslike cycle of operations and are normally stated on a net basis (outlays less receipts). Receipts and outlays.—Trust fund receipts are estimated at $64 billion in 1971, with outlays planned at $55 billion, as shown in table B-6. The transactions of the Federal old age and survivors' insurance fund are far larger than any other trust fund. Table B-6. OUTLAYS AND RECEIPTS OF TRUST FUNDS (in millions of dollars) Receipts Outlays Description 1970 1971 1969 1970 27,376 30,794 27,348 31,531 33,444 2,994 7,538 3,426 3,397 8,774 3,818 3,705 7,255 3,852 4,345 7,431 3,915 5,006 9,829 3,950 1,680 1,816 1,614 1,704 1,854 2,827 4,427 737 278 -454 3,226 4,395 955 754 273 -484 3,776 4,690 959 751 288 4,236 5,170 1,020 766 305 4,643 5,613 980 795 271 45,512 Subtotal Interfund transactions -523 Proprietary receipts from the public. -1,705 51,798 -542 -1,739 57,718 -580 -1,698 54,237 -523 -1,705 60,422 -542 -1,739 66,385 -580 -1,698 43,284 49,517 55,440 52,009 58,141 64,107 1969 Funds to which receipts are appropriated: Federal old-age and survivors insurance trust fund._ __ __ _ 24,690 Federal disability insurance trust fund 2,613 Health insurance trust funds 6,598 Unemployment trust fund 2,792 Railroad employees retirement funds 1,498 Federal employees retirement funds 1,826 Highway trust fund 4,151 Foreign military sales trust fund _ 1,062 Veterans life insurance funds 703 288 Other trust funds (nonrevolving) _ -708 Trust revolving funds (table B-7) __ Total 970 1971 estimate Note.—Excludes extraordinary outlays or credits (—) relating to purchase and redemption of securities of enterprises converted in 1969 from mixed-ownership to private corporations as follows: 1969, $450 million; 1970, - $ 3 5 0 million; 1971, —$100 million. Also, excludes the extraordinary credits of the trust revolving funds for those enterprises noted in table B~7. This group of funds reflects an excess of receipts of $8.6 or $8.7 billion each year, as follows (in millions of dollars): 1969 actual Total receipts, trust funds, Total outlays, trust funds Excess of receipts, trust funds 1970 estimate 1971 estimate 52,009 43,284 58,141 49,517 64,107 55,440 8,725 8,624 8,667 25 SPECIAL ANALYSES The activities of the trust revolving fund subgroup are shown in table B-7. Several of these, representing mixed-ownership corporations, were eliminated from the scope of this fund group, when the enterprises became privately owned during the past fiscal year. Table B-7. T R U S T REVOLVING F U N D TRANSACTIONS (in millions of dollars) Gross outlays Applicable receipts Description 1970 estimate 1969 actual 1971 estimate 1969 actual Federal intermediate credit banks *_ Banks for cooperatives1 Federal National Mortgage Association l Civil Service Commission (employees' life insurance and health benefits) Federal Deposit Insurance Corporation __ All other trust revolving funds 3,620 1,049 3,289 1,170 435 418 Total trust revolving funds. _ Receipts from the public Receipts from other accounts 1970 estimate 1971 estimate 1,229 1,384 1,206 1,388 1,542 367 383 404 54 50 46 105 115 126 106 152 159 6,784 1,885 2,072 6,076 1,431 1,589 (6,207) (577) (1,278) (607) (1.441) (631) 1,038 1 Excludes extraordinary receipts in 1969 resulting from the conversion of the three mixed-ownership enterprises to private corporations, $10,352 million. Also excludes, in 1969, transfers received by the Federal National Mortgage Association from Federal funds, prior to the conversion, $75 million. Balances of the trust funds.—The balances of the trust funds continue to increase, as snown in the following end-of-year figures (in millions of dollars): Open book balances Investments in U.S. securities: Public debt Agency debt Total 1968 actual 1969 actual 4,355 3,884 1970 estimate 4,369 1971 estimate 4,861 ___ 71,982 2,438 80,403 2,293 89,194 1,991 97,743 1,868 _.._ 7SJ74 86,580 95,555 104,472 The breakdown of the balances by fund is disclosed in table B-8. The amounts include both open book balances with Treasury and investments in U.S. securities. Part of the balances is obligated, part is unobligated. The balances on an authorization basis exceed the cash balances because for a few accounts budget authority is not the same as receipts; these differences are listed in the note appended to the table. For 1971, as in many recent years, the largest net investments are expected to be those of the trust funds established by the Social Security Act as amended. 26 THE BUDGET FOR FISCAL YEAR 1971 Table B-8. T R U S T FUND BALANCES (in millions of dollars) As of June 30 Description Federal old-age and survivors insurance trust fund__. Federal disability insurance trust fund Health insurance trust funds Unemployment trust fund Railroad retirement accounts Federal employees retirement funds Highway trust fund Foreign military sales trust fund Veterans life insurance funds Other trust funds (nonrevolving) Trust revolving funds Total 1968 actual 1969 1970 1971 25,548 2,587 1,737 532 4,768 28,119 3,659 2,353 12,566 4,633 20,491 1,521 605 7,092 534 5,008 32,341 5,010 2,287 13,100 4,719 21,969 2,224 655 7,188 600 5,461 35,011 6,640 3,342 13,228 4,799 23,407 3,406 680 7,229 784 5,945 78,774 86,580 95,555 104,472 11,618 4,551 18,631 982 709 7,111 Note.—The balances shown here cover the amounts on deposit with Treasury, and the U.S. securities held. In addition, certain funds have authority to obligate in advance of receiving moneys, and to borrow from the public. The reconciliation is as follows: 1971 1970 1968 1969 Balance available on an authorization basis 96,572 98, 337 107,535 116,316 Unfinanced contract authorizations: Highway trust fund —9,945 -11,258 -12,314 -13,429 -160 -225 Right-of-way revolving fund -100 Foreign military sales trust fund —2, 187 -2,037 -1,867 -1,737 -2 -14 Other -22 Undrawn authorizations to borrow: Federal National Mortgage Association —2,862 Banks for Cooperatives —970 Federal Intermediate Credit Banks -2,970 Unappropriated receipts: 21 Available as needed, on an indefinite basis 21 66 23 Available for appropriation by Congress: 114 112 108 110 Soldiers' Home permanent fund Highway trust fund 3, 406 978 1,513 2, 223 Retained as permanent endowment 6 6 6 6 Balance available on a cash basis 78,774 86,580 95,555 104,472 FLOW OF GOVERNMENT-ADMINISTERED FUNDS Although the main budget figures offset certain receipts in arriving at the outlays, it is possible to reconstruct the data to reflect the gross receipts and outlays, without offsets. Table B-9 presents such a statement. It differs from the unified, comprehensive budget only with respect to grossing and netting, and the distribution here of the nonfunctional adjustments to outlays shown in other tables. The items which are grossed here, but treated as offsets elsewhere, are as follows (in millions of dollars): 1969 actual Receipts regularly offset in individual accounts: Receipts of public enterprise funds (tableB-5) Receipts of trust revolving funds (tableB-7) Reimbursements to other appropriations and funds: Department of Defense—Military Other agencies: Sale or redemption of non-Federal securities (trust funds) Other Receipts offset for the budget by agency and function (table 12) Total _ 1970 tstimatt 1971 estimate 17,453 19,837 21,610 6,207 1,278 1,441 2,376 2,466 2.498 645 729 4,192 795 4,211 927 5,538 31,602 28,587 32,014 27 SPECIAL ANALYSES Table B-9. GROSS FLOW OF GOVERNMENT-ADMINISTERED FUNDS (in millions of dollars) Description 1969 actual 1970 estimate 1971 estimate RECEIPTS BY SOURCE Individual income taxes Corporation income taxes Social insurance taxes and contributions: Employment taxes and contributions Unemployment insurance Contributions for other insurance and retirement... Excise taxes Estate and gift taxes Customs duties Other receipts from the public: General and special funds Public enterprise funds Trust funds (excluding trust revolving funds) Trust revolving funds Reimbursements to appropriations and other funds _ Total receipts from the public _ 87,249 36,678 92,200 37,000 91,000 35,000 34,236 3,328 2,353 15,222 3,491 2,319 38,914 3,340 2,551 15.940 3,500 2,260 42,842 3,335 2,931 17.520 3,600 2,260 5,387 17,453 1,720 6,207 3,750 6,132 19,837 1,760 1,278 3,261 7,435 21,610 1,717 1,441 3,426 219,393 227,973 234,117 85,451 5,708 4,275 15,467 3,958 83,917 6,289 3,923 13,288 4,354 14,859 5,938 7,035 12,270 37,720 8,761 12,976 1,738 16,726 5,870 7,735 13,985 43,415 9,813 14,350 2,331 78,636 6,019 3.421 12,929 5,144 17,351 6,031 8,337 15,807 49,966 9,995 13,827 2,749 175 300 275 1,400 900 PAYMENTS BY FUNCTION National defense International affairs and finance Space research and technology Agriculture and rural development Natural resources Commerce and transportation Community development and housing Education and manpower Health. Income security __ Veterans benefits and services Interest General government Allowances for: Revenue sharing-, _ Civilian and military pay increases Contingencies Total payments to the public. Excess of receipts __. _. -. 216,157 226,472 3,236 1*501 SPECIAL ANALYSIS C BORROWING AND INVESTMENTS The major fiscal responsibilities of the Federal Government include not only the disbursement of cash and the collection of revenues necessary to finance the day-to-day operations of Government programs, but also: • The borrowing of additional cash to meet requirements not covered by current revenues and to refinance maturing obligations; • The management and investment of funds not currently required by trust and other accounts for outlays; and • The provision of advice and assistance, including, in many cases, Government guarantees, for borrowing by certain non-Federal borrowers. This analysis summarizes current developments and trends in borrowings and in investments in U.S. Government securities made by the Treasury Department and other Federal agencies. It also includes discussion of the statutory limitations on the Federal debt, and summarizes current and expected developments in borrowing by Government-sponsored enterprises and in Government-guaranteed debt issued by non-Federal borrowers. All of these are significant factors in determining the impact on financial markets of the Federal programs contained in the 1971 budget. BORROWING FROM AND REPAYMENT TO THE PUBLIC One measure of the impact of Federal fiscal policies on the economy and on financial markets is the volume of net Government borrowing Table C-1. NET CHANGES IN FEDERAL BORROWING (in millions of dollars) 1968 actual Gross Federal debt: Public debt (issued by Treasury) Agency debt (issued by agencies) Total gross Federal debt 2 Less debt held by Government agencies: Public debt Agency debt Net Federal borrowing from the public. 1969 actual l 1970 1971 estimate1 estimate Outstanding end 1971 estimate 22,476 5,944 7,526 856 9,232 -3,232 8,170 -402 370,297 12,206 28,420 8,382 6,000 7,769 382,503 4,329 991 8,888 537 8,975 -391 9,112 -143 102,902 2,318 23,100 -1,044 -2,583 -1,200 277,283 1 The data are adjusted to exclude changes in debt and investment resulting from conversion in 1969 of three former mixed ownership enterprises to private ownership and from reclassification in 1970 of certificates of interest issued by the Commodity Credit Corporation. For details see footnotes in tables C— 3 and C— 4. 3 Excludes debt held by International Monetary Fund. 28 29 SPECIAL ANALYSES (or repayment of borrowing) from the public. Borrowing within the Federal Government itself—mainly borrowing from trust funds— only indirectly affects the financial markets. The budget surpluses achieved in 1969 and projected for 1970 and 1971 enable the Government to make net repayments on the total debt held by the public. These repayments make funds available that help meet heavy demands for funds from other sources—thus reducing pressures on financial markets. This situation contrasts to that in 1968 when net Government borrowing from the public absorbed $23.1 billion. SIZE AND GROWTH OF FEDERAL DEBT Federal debt has risen gradually over most of the past two decades— much more slowly than debt of other major borrowers. During the 15-year period ended on June 30, 1969, gross Federal debt rose by about 35%, and the portion owned by the public rose by about 25%. This compares with increases of 280% in State and local government debt, 240% in corporate debt, and 265% in personal debt. Consequently, net new borrowing by the Federal Government has become a relatively smaller factor in financial markets. In recent years, however, an increasing portion of the Federal securities sold has been in relatively short maturities. The present 4#% statutory ceiling on interest rates payable on marketable issues with maturities exceeding 7 years is substantially below long-term market levels. As a result, no new direct Treasury obligations with longer maturities have been issued since January 1965. This has tended to concentrate Federal borrowing in the short end of the market and to increase both the gross dollar volume and the number of offerings each year. Since 1965, the average length of the Treasury marketTable C-2. COMPARISON OF TRENDS IN FEDERAL DEBT, INTEREST AND GROSS NATIONAL PRODUCT (in billions of dollars) Fiscal year 1954 1955.. 1956 .. 1957 1958 1959_. 196O._ 1961. 1962 1963 1964 1965 1966__ 1967 1968_ 1969 1970 _ _ . .._„ Gross Federal debt—end of year 1 Debt held by public —end of year 270.8 274.4 272.8 272.4 279.7 287.8 290.9 292.9 303.3 310.8 316.8 323.2 329.5 341.4 369.8 367.1 374.7 224.5 226.6 222.2 219.4 226.4 235.0 237.2 238.6 248.4 254.4 257.6 261.6 264.7 267.5 290.6 279.5 278.5 Interest on debt held by public 5.2 5.2 5.6 6.0 6.4 6.5 8.1 7.9 8.0 8.8 9.4 10.0 10.6 11.8 12.8 14.3 15.6 GNP for year 362 379 409 431 440 469 495 506 542 573 612 654 721 766 823 901 959 Debt held by public as percent of GNP 62.0 59.8 54.3 50.9 51.5 50.1 47.9 47.2 45.8 44.4 42.1 40.0 36.7 34.9 35.3 31.0 29.0 Interest as percent of GNP 1.4 .4 .4 .4 .5 .4 .6 .6 .5 .5 .5 .5 .5 .5 .6 1.6 1.6 1 Excludes special notes issued to International Monetary Fund and international lending agencies. 30 THE BUDGET FOR FISCAL YEAR 1971 able debt has declined from over 5 years to less than 4 years, and the amount of debt that needs refunding each year now exceeds $100 billion. In the aggregate, Federal debt held by the public has risen much more slowly than the increase in the gross national product. The publicly held Federal debt outstanding at the end of 1954 amounted to 62% of the gross national product during the year. By the close of 1969, the comparable ratio had fallen to 3 1 % (see table C-2). From a budgetary standpoint, changes in the net interest cost of the debt held by the public are more significant than changes in the total amount of debt. As the result of the general increase in interest rates in recent years, the amount of interest payable on both new cash borrowings and refundings has increased substantially. Between 1959 and 1969, net interest paid to the public on the Federal debt more than doubled (increasing from $6.5 billion to $14.3 billion), while the interest-bearing debt was up by only 20%. In that period, the rise in interest costs roughly kept pace with the growth in the gross national product. In 1959, net interest paid to the public was about 1.4% of the gross national product, compared with 1.6% in 1969. BORROWING BY FEDERAL AGENCIES Certain business-type activities of Federal agencies are wholly or largely financed by borrowing. In most cases, the funds these agencies require are borrowed from the Treasury. They affect Federal debt indirectly, when the Treasury borrows to finance the agencies' outlays. Outstanding agency debt to the Treasury on June 30, 1969, totaled $28.1 billion. Some Government agencies are authorized to issue their own debt instruments to the public or to other Government agencies and funds. Such agency borrowing is part of the Federal debt, as the term is used in the summary tables of the budget. Since the disbursement of such borrowed money represents a budget outlay, the authorization to borrow likewise represents budget authority. Net changes in outstanding agency debt (other than debt owed to the Treasury) are shown by agency in table C-3. For both 1970 and 1971, agency debt repayments will exceed their new borrowing by $3.2 billion and $0.4 billion, respectively. Of these amounts, net repayments of borrowing from the public will account for $2.8 billion and $0.3 billion, respectively. 31 SPECIAL ANALYSES Table C-3. AGENCY BORROWING * (in millions of dollars) Increase or decrease (—) Description 1969 actual Borrowing from the public: Agriculture: Commodity Credit Corporation 2 Farmers Home Administration Defense Health, Education, and Welfare... Housing and Urban Development: College housing loans ___ Public facility l o a n s - - . - - . Federal Housing Administration .--?--Government National Mortgage Association _ Federal National Mortgage Association 3 Veterans Administration Export-Import Bank Farm Credit Administration: Banks for cooperatives 3 Federal intermediate credit banks 3-_ Small Business Administration _. Tennessee Valley Authority All other Undistributed4 Total borrowing from the public. Borrowing from other funds: Agriculture2 Defense __ _ Health, Education, and Welfare Housing and Urban Development: College housing loans Public facility loans Federal Housing A Jministration Government National Mortgage Association. Federal National Mortgage Association3 Veterans Administration _ Farm Credit Administration: 3 Banks for cooperatives Federal intermediate credit banks 3 Small Business Administration Tennessee Valley Authority __ Undistributed4Total borrowing from other fundsTotal agency borrowing* -28 -74 6 1970 estimate -1,583 -286 -71 -3 1971 estimate -89 -79 -I Outstanding end 1971 estimate 357 1,456 127 -107 -4 -21 -145 -65 1,289 106 574 1,197 -101 -706 -75 -354 1,309 1,412 -164 351 * -58 440 5 1,455 14 319 -2,841 -259 9,889 69 -14 6 -118 -15 -1 -45 278 227 78 236 * 13 49 -72 105 -55 94 5 63 36 -42 -2 -6 -56 -5 -1 -6 -33 723 44 99 -24 -10 366 -64 -63 -29 100 -391 -143 2,318 -3,232 -402 12,206 339 -2 55 -48 221 80 215 -291 -158 139 * -9 -1 29 593 -36 -15 -1 401 * Less than $500 thousand. 1 Excludes agency borrowing from Treasury. changes in agency debt prior to conversion, and exclude following net changes in agency debt resulting from conversion to private ownership (in millions): From From other public funds Total Federal National Mortgage Association _ -5,528 -508 -6,036 Banks for cooperatives.. —1,390 —1,390 Federal intermediate credit banks _ -3,432 -149 -3,581 Total -10,350 -657 -11,006 * Adjustment between two sections of the table is to offset other figures for the changes in agency debt held as instruments by mixed-ownership enterprises at time of conversion to private ownership (see footnote 1 to table C-4). 32 THE BUDGET FOR FISCAL YEAR 1971 More than half of the agency debt of $12.2 billion estimated to be outstanding on June 30, 1971, will consist of $7.1 billion in certificates of participation in pools of loans issued in prior years by the Government National Mortgage Association, as trustee on behalf of the Departments of Agriculture, Health, Education, and Welfare, and Housing and Urban Development, the Veterans Administration, and the Small Business Administration. No further issuance of such certificates of participation is currently planned for 1970. Of the $1,315 million in certificates maturing in 1971, an estimated $893 million will be refunded and the remaining $422 million retired. Other major types of agency debt include portfolio certificates and debentures sold by the Export-Import Bank, family housing mortgages issued by the Department of Defense and the Coast Guard, revenue bonds by the Tennessee Valley Authority, and debentures by the Federal Housing Administration (in payment of some of the insurance claims arising from Federal mortgage insurance). The only significant increases in agency borrowing from the public are $0.4 billion by TVA in both 1970 and 1971. Two other types of agency borrowing transactions are included in the 1969 and 1970 columns of table C-3. During 1969, three major groups of Government-sponsored credit agencies completed conversion to private ownership and were reclassified as private agencies. The outstanding debt of these agencies at the time of conversion totaled $11,006 million. These are discussed in more detail in the section dealing with borrowing by Government-sponsored agencies.1 In addition, as of July 1, 1969, certificates of interest of the Commodity Credit Corporation totaling $1,590 million, which were formerly treated as sales of guaranteed loans, were reclassified as agency borrowing. The issuance of such certificates was suspended in August 1969 and liquidation of outstanding certificates is expected to be completed in 1970. AGENCY INVESTMENTS IN FEDERAL SECURITIES Trust funds and some public enterprise funds accumulate cash in excess of current requirements in order to meet possible future claims and demands. Such temporary cash surpluses are usually invested in public debt or agency debt securities. These investments, in turn, are "cashed" as the money is needed for disbursement. Neither purchases nor redemptions of these securities are counted in budget outlays or receipts. As table C-4 indicates, net investments by Government agencies and trust funds in Government securities are estimated to total $8.6 billion in 1970 and $9.0 billion in 1971. The total investments of Government agencies and trust funds will reach an estimated $105.2 billion by June 30, 1971. This means that they will hold about 27% of the gross Federal debt. Four major trust funds—the Federal Old-Age and Survivors Fund, the Civil Service Retirement and Disability Fund, the Unemployment Trust Fund, and the National Service Life Insurance Fund—account for three-quarters of these holdings. i See pp. 35-36. SPECIAL 33 ANALYSES Table C-4. AGENCY INVESTMENTS IN FEDERAL (in millions of dollars) SECURITIES Increase or decrease (—) Description 1969 Investment in public debt (issued by Treasury): Health, Education, and Welfare: Federal old-age and survivors ins. trust fund... Federal disability insurance trust fund Federal supplementary medical ins. trust fund.. Federal hospital insurance trust fund Housing and Urban Development: Federal Housing Administration _ Government National Mortgage Association Other Labor: Unemployment trust fund Transportation: Highway trust fund Treasury: Exchange Stabilization Fund Veterans Administration: Trust funds___ _ Other _ Civil Service Commission: Trust funds Farm Credit Administration: Trust funds1 Federal Deposit Insurance Corp.: Trust fund Federal Home Loan Bank Board: FSLIC Railroad Retirement Board: Trust funds All other. Total investments in public debt Investment in agency debt: Health. Education, and Welfare: Federal old-age and survivors ins. trust fund... Federal disability insurance trust fund _.. Federal hospital insurance trust fund Housing and Urban Development: Federal Housing Administration. Government National Mortgage Association 2__. Labor: Unemployment trust fund Treasury: Exchange Stabilization Fund Veterans Administration: Trust funds Civil Service Commission: Trust funds Farm Credit Administration: Trust fund _. Federal Home Loan Bank Board: FSLIC... _ Railroad Retirement Board: Trust funds All other. _ . Total investments in agency debt Total agency investments in Federal securities _ 1970 1971 Holdings end 1971 estimate 2,765 1.151 77 631 3.823 1.304 -308 250 3.628 1,595 174 -379 32.959 6.256 224 1.761 167 501 29 1.174 534 -724 208 -241 21 554 707 -23 247 126 7 263 1.182 1.310 893 60 13.052 3.402 -137 63 1.972 17. 313 216 131 8 212 59 1.630 51 57 1.575 6.858 480 23.676 337 154 275 15 360 121 98 8 4.850 2.391 4.599 130 8.888 8,975 9.112 102.902 220 -10 -15 -20 -10 625 85 70 -3 105 -100 -25 175 90 29 71 -10 -5 -6 -78 -65 -6 -8 -73 69 157 127 -105 -15 -10 -10 365 485 -80 -8 -20 -6 160 110 65 537 -391 -143 2,318 9.425 8.583 8.969 105.220 1 Transactions for 1969 include only changes in investments prior to conversion to private ownership and exclude following changes resulting from such conversion: Farm Credit Administration: Banks for cooperatives Federal intermediate credit banks Treasury Agency —51 —160 —23 —13 deht deht Tolal —74 —173 Total -211 -36 -247 Transactions of other funds exclude disinvestments of debt of the former mixed-ownership corporations, after conversion to private ownership, as follows: 1969, $185 million; 1970, $368 million; and 1971. $100 million. * Transactions for 1970 include disinvestment of $7 million of CCC certificates of interest, reclassified as debt as of July 1, 1969. 390-700 O—70 3 34 THE BUDGET FOR FISCAL YEAR 1971 LIMITATIONS ON FEDERAL DEBT Since enactment of the Second Liberty Bond Act in 1917, a general statutory limitation has been placed on the amount of certain types of Federal debt that can be outstanding at any one time. The limit currently applies to a special definition of the debt, consisting of: • All public debt issued by the Treasury since September 1917, whether held by the Government or the public; • Agency debt in the form of participation certificates issued during 1968 under the Participation Sales Act of 1966; and • Other debt issued by Federal agencies which, according to explicit statutes, is fully guaranteed as to principal and interest by the United States. The statutory limit based on this definition is $377 billion for the period beginning April 7, 1969, and ending on June 30, 1970. This includes a temporary increase of $12 billion, which expires on June 30, 1970, after which the permanent limit of $365 billion becomes effective. The actual and estimated debt subject to this definition outstanding on June 30, 1968, 1969, 1970, and 1971, compared with the Federal debt held by the public and the gross Federal debt on the same dates, are shown in table C-5. Table C-5. DEBT SUBJECT TO GENERAL STATUTORY LIMITATION (in millions of dollars) 1971 estimate 1968 actual 1969 actual 1970 estimate Federal debt held by the public Add: Federal securities held by Government agencies. 290,629 79.140 279,483 87,661 278,483 96,251 277,283 105,220 Gross Federal debt 369,769 367,144 374,734 382,503 654 636 430 425 1,951 2,571 525 4,650 5,888 5,007 1,863 2,472 728 5,350 1,777 1.767 1,015 4,888 1,683 1,412 1,455 5,601 9 9 9 14 Total Federal debt not subject to limitation. 21,255 11,058 9,886 10,590 Federal debt subject to statutory limitation ___ Add: District of Columbia Stadium bonds Special notes held by International Monetary Fund 348,514 356,087 364,848 371,913 20 20 20 20 2.209 825 825 825 350.743 356,932 365,693 372,757 - .- Deduct: Public debt not subject to limitation _ Agency debt not subject to general limitation: Department of Defense.«. Export-Import Bank Tennessee Valley Authority Participation certificates* Federal National Mortgage Association Farm Credit Administration Other _ Total debt subject to statutory limitation 1 Represents certificates of participation issued by Government National Mortgage Association as trustee for 5 departments and agencies (excluding those issued during 1968). SPECIAL ANALYSES 35 While the Federal debt held by the public is projected to decline by $1.0 billion in 1970 and by $1.2 billion in 1971, the debt subject to statutory limitation is scheduled to rise by $8.8 billion and $6.9 billion, respectively. This is due primarily to the fact that the debt subject to limitation includes most of the debt held by Government trust funds and other agencies and the estimated increases in such holdings equal or exceed the rise in debt subject to limitation. On the basis of present estimates, the debt subject to limitation will slightly exceed the permanent limit of $365 billion, which becomes effective on June 30, 1970. The President has announced his intention to recommend an increase in the limit prior to that time. In addition to the broad range of Treasury and agency obligations subject to the general debt limitation, borrowing by other agencies in most cases is subject to explicit statutory authorization; e.g., outstanding revenue bonds issued by the Tennessee Valley Authority are currently limited to $1,500 million. BORROWING BY GOVERNMENT-SPONSORED ENTERPRISES Five types of Government-sponsored enterprises, in which the Government investment has now been retired, continue to borrow under Government auspices. Three of these—the Federal National Mortgage Association, the banks for cooperatives, and the Federal intermediate credit banks—completed the shift to private ownership during 1969. The borrowing programs of all five types of enterprises are subject to Federal supervision. All, in addition, consult the Treasury Department, either by law or custom, in planning their market offerings. The Federal National Mortgage Association and the Federal home loan banks are required to obtain Treasury approval of the terms and timing of specific offerings and the Treasury Department is authorized to purchase limited amounts of their obligations. All except the Federal National Mortgage Association are systems of regional lending institutions that pool their borrowings. All have a long history of successful financial performance. Hence, despite the absence of explicit Federal guarantees, the obligations of these enterprises are sold at interest rates only slightly higher than those obtained on direct Treasury issues. Each of these Government-sponsored agencies expanded its borrowing in 1969 and anticipates further expansion in 1970 and 1971 (see table C-6). Total net new borrowing in 1970 will reach a new peak of almost $11.0 billion, primarily because of the strong support provided to the housing market by fche Federal National Mortgage Association and the Federal home loan banks. While some improvement in this market is anticipated in 1971, net new borrowing by the five types of Government-sponsored enterprises as a whole is expected again to be substantial, with the total outstanding debt rising by an estimated $7.7 billion. 36 T H E BUDGET FOR FISCAL YEAR 1 9 7 1 Table C-6. NET BORROWING OF GOVERNMENT-SPONSORED ENTERPRISES (in millions of dollars) Increase or decrease (—) 1970 estimate 1971 estimate 2,043 5,151 4,342 17.571 i 659 458 44 416 582 73 459 556 1,525 5.113 6,997 820 4,780 2,300 12,601 3,965 10,973 7,730 43,806 1969 actual Housing and Urban Development: Federal National Mortgage Association Farm Credit Administration: Banks for cooperatives . Federal intermediate credit banks Federal land banks Federal Home Loan Bank Board: Federal home loan banks Total 1 Outstanding end 1971 estimate 1 Excludes net borrowing in 1969 prior to conversion to full private ownership; FNMA $149 million, banks for cooperatives $160 million; and Federal intermediate credit banks —$197 million. GOVERNMENT GUARANTEES OF NON-FEDERAL BORROWIISFG Seven departments and seven independent Federal agencies guarantee in whole or in part obligations issued by specific groups of nonFederal borrowers. Net changes in outstanding guaranteed debt of such borrowers are shown by agency and program in table C-7. The bulk of the obligations so guaranteed are mortgage loans to private borrowers to purchase or construct housing; these are insured by the Federal Housing Administration or the Farmers Home Administration, or guaranteed by the Veterans Administration. In these and other programs, Government insurance or guarantees reduce or eliminate the risk of loss for private lenders and thus broaden the access of eligible borrowers to financial markets or improve the terms on which they can obtain needed funds. In some cases, the Federal agency provides direct or indirect subsidies; e.g., by payment of (1) most of the debt service on bonds issued by local public authorities to finance construction of low-rent public housing—as well as placement fees on public housing and urban renewal notes when market rates exceed 6%, (2) the full amount of interest payments during school and service years on most insured loans to students, plus incentive payments to lenders during the life of loan to the extent necessary to provide equitable returns, and (3) supplementary interest payments by the Farmers Home Administration in placing loans with private lenders. In a few cases, a Federal agency sponsors offerings of guaranteed obligations for a number of borrowers simultaneously; e.g., the periodic offerings of guaranteed public housing notes and bonds and urban renewal notes by the Department of Housing and Urban Development. In many cases, guarantees of non-Federal obligations have only an indirect effect on the budget. Nevertheless, they help to assure financing of programs or projects that, in the absence of such support, otherwise might have been financed elsewhere on less favorable terms, if at all. In some cases, sales of direct Federal loans to private lenders with the aid of Federal guarantees enable the program in question to make new loans that otherwise could not have been made within 37 SPECIAL ANALYSES prevailing budgeted totals. Net additions to guaranteed non-Federal debt arising from sale of direct loans by five major programs, less repurchases (puts), are shown in a footnote at the bottom of table C-7. As table C-7 indicates, outstanding guaranteed debt of non-Federal borrowers will increase by $10.6 billion in 1970 and by another $18.3 billion in 1971, primarily because of heavy federally assisted borrowing for housing. By the end of 1971, such guaranteed debt will amount to an estimated $145.1 billion. The volume and trends in this type of financial assistance are discussed more fully in Special Analysis E, "Federal Credit Programs".1 Table C-7. NET GOVERNMENT-GUARANTEED BORROWING BY NONFEDERAL BORROWERS (in millions of dollars) Increase or decrease (—) 1969 actual Funds appropriated to the President: Military assistance ___ Economic assistance l Agriculture: Commodity Credit Corporation__ _ Farmers Home Administration Commerce: Economic Development Administration. Maritime Administration Health, Education, and Welfare: Student loans Medical facilities loans Housing and Urban Development: Urban renewal loans Public housing loans Guaranteed communities loans Federal Housing Administration Mortgage-backed securities Veterans Administration District of Columbia Export-Import Bank _ Interstate Commerce Commission Small Business Administration All other Total 3_ 1970 Outstanding end 1971 estimate 1971 115 51 90 366 25 513 482 1,268 667 340 587 2,258 5,523 12 55 14 23 24 131 63 775 632 713 704 92 2,810 92 445 878 371 1,043 40 5,202 500 130 456 3,502 9,601 95 76,080 1,500 36,945 135 4,519 131 1,450 86 145,056 4,367 1,558 1,426 55 7,877 1,000 1,888 439 -9 162 -19 1,179 365 -2 115 1,301 -10 481 -4 9,694 10,612 18,331 -10 1 2 Includes in 1971 Overseas Private Investment Corporation. Figures exclude reduction of $1,590 million in guaranteed loans as result of reclassincation on July 1, 1969. of certificates of interest of Commodity Credit Corporation as Federal agency debt. 3 Includes net increase in outstanding debt resulting from direct loans sold with Federal guarantees to private lenders minus repurchases (puts) by following programs: l969 I970 1971 Agriculture: . . Commodity Credit Corporation 667 Farmers Home Administration 552 768 2,507 Housing and Urban Development 50 100 Veterans Administration 1 61 526 Export-Import Bank _ 378 34 500 Total i See pp. 73-74. 1,598 913 3,633 38 THE BUDGET FOR FISCAL YEAR 1 9 7 1 TOTAL FEDERAL AND FEDERALLY ASSISTED BORROWING As the foregoing analysis indicates, in contrast to the net repayment of the Federal debt held by the public experienced in 1969 and estimated for 1970 and 1971, federally assisted borrowing has been increasing and further increases are projected. Table G-8 summarizes the developments in these three categories of borrowing, together with adjustments necessary to eliminate double counting. Federal borrowing from the public is expected to decline $2.6 billion in 1970 and drop another $1.2 billion in 1971. In contrast, total Federal and federally assisted borrowing from the public is expected to increase $12.8 billion in 1970 and $19.1 billion in 1971. In 1970, the bulk of the increase is accounted for by the increase of $11.3 billion in borrowing of Government-sponsored agencies. However, in 1971, most of the increase arises from the net expansion of $12.5 billion in Governmentguaranteed borrowing from the public by other non-Federal borrowers. Table C-8. NET BORROWING FROM PUBLIC BY GOVERNMENT, GOVERNMENT-SPONSORED AND GOVERNMENT-GUARANTEED AGENCIES (in billions of dollar*) Increase or decrease (—) 1969 actual Federal borrowing from or repayment (—) to public* a Outstanding end 1971 estimate 1970 estimate 1971 estimate -1.0 -2.6 -1.2 277.3 43.8 Debt of Government-sponsored agencies Less borrowing or repayment (—) of debt held by Government agencies 4.0 11.0 7.7 -1.1 -.4 -.1 Net Government-sponsored borrowing from public 5.1 11.3 7.8 43.8 9.7 10.6 18.3 145.1 1.7 .6 5.6 .4 4.6 .3 18.5 5.1 .5 1.0 1.5 Government guaranteed debt of non-Federal borrowers 8 _ Less borrowing from Government or Governmentsponsored agencies: Federal National Mortgage Association. _ Government National Mortgage Association Less guarantees of securities backed by insured debt Net Government-guaranteed borrowing from public by non-Federal borrowers. _ 7.5 4.1 12.5 119.9 T o t a l Federal and federally assisted borrowing from public 11.6 12.8 19.1 441.0 *Lets than » See table 2 See table ' See table $500 thousand. C-l. C-6. C-7. SPECIAL ANALYSIS D INVESTMENT, OPERATING, AND OTHER BUDGET OUTLAYS This analysis focuses on the distinction between outlays that are of an investment or "capital" nature and outlays directed to operating, or "current," purposes. To facilitate the analysis, the outlays presented in the budget as loan and expenditure accounts are classified in the following three categories: Investment-type outlays—consisting of: • Tangible investments in Federal assets of both a physical and financial nature; • Tangible investments in State, local, and private physical assets; • Intangible investments in the developmental capability of our Nation as represented by its capacity for better education, increased technical innovation, and improved health for our citizens. The purpose of this classification is to identify outlays that yield benefits over several years and to distinguish between those outlays and funds that provide benefits in the year in which they are made. Funds that accomplish their purpose within the year are placed in the following category. Current outlays—consisting of: • Aid and special services to agriculture, business, labor, homeowners, tenants, veterans, and for international commitments and Federal welfare obligations. • Retirement and Social Insurance representing Federal trusts established to provide an assured income to contributors or their families in the event of unemployment, retirement, disability, or death. Outlays that cannot be classified in either of these two categories are placed in the following residual classification. Unclassified outlays—consisting of: • Allowance for revenue sharing; • Allowance for pay increases; • Allowance for contingencies ; • Adjustments for financial activity between agencies and special funds that are wholly within the Federal Government. • Other services related to: (a) repair, maintenance, and operation of physical assets; (b) regulatory and control activities; (c) operation and administration of Federal departments and agencies; and (d) interest on the debt and miscellaneous Federal funds and accounts. Each of the major classifications is subdivided so that civil and national defense outlays can be separately analyzed. Wherever possible, adjustments have been made to remove the effect of transactions that are wholly within the Government (interfund and intragovernmental transactions) and to reflect receipts that can most meaningfully be applied against outlays for market-oriented or business-type activities. 39 40 THE BUDGET FOR FISCAL YEAR 1971 Summary.—The primary factors influencing investments and current outlays in 1971 are: • The proportion of the budget dedicated to civil purposes has continued to grow. Civil outlays are expected to be $130.3 billion, 65% of the total 1971 budget—a significant increase when compared with the 1970 budget, in which civil outlays are expected to be only 62% of the total. • The administration's determination to stem inflation is reflected in important decreases in investments and current outlays. Civil additions to Federal assets, for example, are expected to be $5.4 billion in 1971, a reduction of $2.1 billion, or 28%, from 1970. • A reordering of priorities, to direct additional resources to the most pressing domestic problems. The areas being given greater priority are development investments in education, training, and health, and current outlays for welfare. The investment in education, training, and health is $11 billion in 1971, an increase of $1.1 billion, 11%, over 1970. Current outlays for welfare are $7.9 billion, or 29%, up $1.8 billion from 1970. The major reductions are in investments for loans, down $2.3 billion, in major commodity inventories, down $0.6 billion, and in current outlays for business, down $0.9 billion. • The built-in increases in current outlays necessary to honor the obligations of our retirement and social insurance systems. These outlays will be $49.3 billion, an increase of $5.7 billion over 1970, making these benefit payments 24.5% of the total 1971 budget. Table D-l. CIVIL INVESTMENTS AND CURRENT OPERATING OUTLAYS (in billions of dollars) Outlays 1971 estimate 1970 estimate 1969 actual Amount Percent of budget Amount Percent of budget Amount Percent of budget 3.2 .1 1.8 3.7 1.8 1.4 0.7 .1 .4 .2 .6 .3 2.2 .4 .2 1.2 .2 .1 2.4 .6 .2 1.2 .3 .1 3.0 -.1 .3 1.5 .2 .1 .2 .1 .2 .1 Subtotal, additions to Federal assets 1 . _ _ _ 6.3 3.4 7.5 3.8 5.4 2.7 Additions to State, local, and private assets: State and local assets Private assets 5.6 1.1 3.0 .6 6.2 1.0 3.1 .5 6.7 .9 3.4 .4 Subtotal, additions to State, local, and private assets x _. 6.7 3.6 7.2 3.6 7.6 3.8 INVESTMENT-T YPE OUTLAYS Additions to Federal assets: Loans Other financial investments Public worksites and direct construction Major commodity inventories Major equipment __ Other physical assets—acquisition and improvement See footnotes at end of table. .1 41 SPECIAL ANALYSES Table D-1. CIVIL INVESTMENTS AND CURRENT OPERATING OUTLAYS—Continued (in billions of dollars) Outlays 1969 actual 1970 estimate 1971 est imate of budget of budget of budget INVESTMENT-TYPE OUTLAYS—-Con. Other development outlays: 8.8 6.5 4.8 3.5 .2 .1 Subtotal, other development outlays J 15.5 Total, investment-type outlays1.. __._ Education, training, and health __ Research and development Engineering and natural resources surveys 2 9.9 6.4 5.0 3.2 11.0 6.1 5.5 3.1 .1 .2 .1 8.4 .2 16.5 8.3 17.3 8.6 28.4 15.4 31.2 15.7 30.3 15.1 Current expenses for aids and special services: Agriculture 2 Business 2 Labor . Homeowners and tenants 2 Veterans 2 International aids _ _ Welfare aids _ ._ Other aids and special services 2__ 4.2 1.7 .7 -.5 7.6 1.6 4.7 3.4 2.3 .9 .4 -.2 4.1 .9 2.5 1.8 4.5 2.0 .9 .1 8.6 1.5 6.1 4.5 2.3 1.0 .5 .1 4.3 .8 3.1 2.3 5.4 1.1 1.0 .5 8.9 1.4 7.9 4.9 2.6 .5 .5 .2 4.4 .7 3.9 2.5 Subtotal, current expenses for aids and special services l 23.4 12.7 28.2 14.3 31.1 15.5 34.1 2.1 18.5 1.1 38.1 2.6 19.2 1.3 43.1 2.9 21.4 1.5 2.4 1.3 2.8 1.4 3.2 1.6 38.6 20.9 43.5 22.0 49.2 24.5 CURRENT OUTLAYS Retirement and social insurance benefits: Insurance benefits Unemployment benefits Other retirement and social insurance benefits 2 Subtotal, retirement and social insurance benefits 1_ Other services and current operating expenses: Repair, maintenance and operation of physical assets (excluding special services) Regulation and control Other operation and administration Interest 2 .8 .9 .4 .5 .9 1.2 .4 .6 .9 1.4 .5 .7 2.9 13.0 1.6 7.0 3.4 14.4 1.7 7.3 3.5 13.8 1.7 6.9 Subtotal, other services and current operating expenses1 17.5 9.5 19.8 10.0 19.7 9.8 79.6 43.1 91.6 46.3 100.0 49.8 107.9 58.5 122.7 62.0 130.3 64.9 Total, current outlays 1 Total, investment-type outlays and current outlays J . 1 Subtotals and totals may not add due to rounding. 2 Includes offsets for interbudgetary transactions. 42 THE BUDGET FOR FISCAL YEAR 1 9 7 1 OUTLAYS OF AN INVESTMENT NATURE Outlays of an investment nature are divided into three categories: (1) additions to Federal assets; (2) additions to State, local, and private assets; and (3) developmental outlays. The investment-type portion of civil outlays is $30.3 billion, amounting to approximately 15% of the budget for both years. Defense investments are $30.2 billion and are now 42% of the 1971 defense budget—a reduction of 0.5% from 1970. A principal component of investments is civil Federal assets which in 1971 will be $5.4 billion, having declined by $2.1 billion, or 28%, from its 1970 level. Additions to Federal assets.—This category comprises additions to both financial and physical assets of the Federal Government. The financial assets are primarily direct loans—for example, loans to finance private housing construction and encourage homeownership, to help small businesses, to finance rural electric and telephone systems, and to promote economic development abroad. Federal financial assets include both loans and other financial investments that are classified in the expenditure account, as well as loans in the loan account. Other financial investments include the capital provided for certain international organizations and for supersonic aircraft development. Civil loans and financial assets are now $2 billion and represents 1% of the 1971 budget. As a result of increased asset sales, civil investment in loans and financial assets decreased by $2.1 billion from the 1970 budget. (Special Analysis E discusses financial investments in greater detail, pp. 65 to 80.) Additions to physical assets include outlays for public works, such as dam construction, flood control projects, and Federal power systems. They also include changes in major commodity inventories and outlays for major equipment (including military equipment) and for the acquisition and improvement of real property and other physical assets. Additions to civil physical assets are $3.4 billion in 1971, a small decrease of $11 million over 1970. The major change is in commodity inventories, which are expected to return $77 million due to the excess of receipts from sales over new outlays. Additions to State, local, and private assets.—Federal outlays in this category add to State, local, and private assets. Grants-in-aid that add to the physical assets of State and local governments are primarily for the construction of highways (mainly through the highway trust fund), hospitals, airports, waste-treatment works, watershed protection projects, schools in federally affected areas, and public facilities under regional economic development programs for depressed regions. Outlays that increase the value of privately owned assets are largely for the conservation and improvement of private farmland and water, for grants for construction of private nonprofit hospitals and other health facilities, and for construction subsidies to the merchant fleet. SPECIAL ANALYSES 43 Civil additions to State, local and private assets is $7.6 billion, an increase of $0.4 billion primarily in Federal contribution to highways, hospitals, and other facilities necessary at the State and local level. These increases, however, have been kept to a much slower growth rate falling from an annual rate of 8% in 1970 to 5.9 %in 1971. Developmental outlays.—Federal outlays of this type are principally for research and development, education and health, and other programs that improves the Nation's knowledge, technical skills, and physical vigor. The Federal outlays shown in this category do not fully reflect the Government's contribution to the productivity of the economy. Certain other programs that further this end are classified in accordance with their principal purpose; thus, veterans educational benefits are listed as veterans aids rather than as developmental outlays. Similarly, the training of military personnel or other Government personnel is treated as an operating expense and not as part of the Government's education and training programs. Civil developmental outlays are $17.3 billion, an increase of $0.8 billion from 1970, to become 8.6% of the budget instead of the 8.3% that it was in 1970. Civil outlays for education, training and health are $11.9 billion in 1971. This amount is 5.5% of the 1970 outlays—larger than in 1970 (5%), reflecting the increased concern of the administration for the need to maintain the resources that in the long run, will help determine the Nation's ability to grow. Current civil outlays for research and development are $6.1 billion in 1971 and reflect a small decline from the 1970 level. The rate of decline in 1971 is 4.2%, as compared with 1.5% in 1970. OUTLAYS OF A CURRENT NATURE Outlays of a current nature are divided into the following categories: (1) current expenses for aids and special services; (2) retirement and social insurance benefits; and (3) other services and current operating expenses. The current outlays portion of civil outlays are $100 billion, an increase of $8.4 billion from 1970. The rate of increase, however, declined from 15.2% in 1970 to 9.2% in 1971. Current expenses for aids and special services.—Outlays classified under this heading provide aids or special services to certain groups, mainly in the year in which the outlays are made. In addition to such items as outlays for the farm programs of the Commodity Credit Corporation, maritime operating subsidies, veterans pensions, and grants to foreign nations for economic and military assistance, this category includes: (1) administrative and other operating expense, attributable to investment-type programs that benefit specific groups; and (2) the costs of maintaining the physical assets related to those programs. Only part of the Federal Government's aid to special groups is reflected in this classification, which is limited by definition to current expenses. For example, subsidies for the construction of private merchant ships are classified as additions to private assets. Similarly, 44 THE BUDGET FOR FISCAL YEAR 1 9 7 1 outlays for which the Federal Government receives assets or collateral (as the acquisition of farm commodities by the Commodity Credit Corporation) are treated as additions to Federal assets. Many indirect Government aids are excluded from this classification either because they are not reflected in outlays or cannot be readily measured. Examples of such indirect benefits are preferential tax treatments. Although outlays in this category essentially provide a direct aid or special service yielding immediate benefits, some of the items included contribute indirectly to the Nation's future development. Among these are grants for slum clearance and urban renewal. The rate of growth of all classifications in this category has slowed down, except for aid to homeowners, tenants, and agriculture which show higher growth rates than in 1970. There is an 18% increase for agriculture as compared with 9.3% in 1970, and a 239% increase for homeowners and tenants. Significant areas of decline are business, $1.1 billion, a reduction of $0.9 billion from 1970, and a change from the 19.3% growth rate of 1970 to a cutback of 45.2% in 1971 and international aid, $1.4 billion, reduced $0.1 billion and accelerates the 1970 cutback rate of 4.9% to 9.4% in 1971. An area that continues at a high growth rate is welfare aid, which is expected to be $7.9 billion in 1971, up by $1.8 billion from 1970 and growing at a 29.4% rate, which is slightly smaller than the 30.1% rate of the 1970 budget. Retirement and social insurance benefits.—This category applies only to trust funds. It covers benefit programs that: (1) are financed from special taxes or contributions; and (2) provide insurance against the loss of income due to unemployment, retirement, disability, or death. It does not include outlays for Government employees' health and life insurance expenditures, which are in the form of premium payments to approved companies. A large part of the growth in current outlays is due to necessary increases for retirement and social insurance benefits. Outlays for these benefits are expected to exhibit a growth rate of 13% in 1971, and rise to $49.2 billion. Social insurance benefits are now 38% of all outlays for civil purposes and 25% of the budget. All of the retirement and social insurance categories exhibited an increase. Insurance benefits, $43.1 billion, with a growth rate increasing from 11.7% to 13.1%. Unemployment benefits, $2.9 billion, with a rate of growth declining from 34.6% in 1970 to 10.7% in 1971. Other services and current operating outlays.—The outlays reported under this heading support a wide range of activities. They consist mainly of: pay and subsistence of military personnel; repair, maintenance, and operation of physical assets of the national military establishment and general purpose public buildings; conduct of foreign affairs; tax collection; payment of interest on the national debt; and operation and administration of other direct Federal programs not elsewhere classified. Other benefits and social insurance benefits, $3.2 billion, slowing the rate of growth from 17.2% in 1970 to 14.2% in 1971. SPECIAL ANALYSES 45 UNCLASSIFIED Certain transactions cannot be properly classified into any of the categories described above. The major examples of such transactions include revenue sharing and special allowances for: (1) pay increases and (2) unforeseen contingencies. Interfund and intragovernmental receipts arise as a result of transactions between Government agencies or funds. These transactions occur entirely within Government accounts and are deducted from outlays to avoid double counting. In order to provide a measure of outlays by character, most interfund and intragovernmental receipts are allocated to a particular category whenever possible. Thus, for example, interest received by the social security and other trust funds is deducted from the Interest category in order to derive a measure of interest outlays affecting the public. Government agency contributions for employee retirement, which help to finance retirement benefits, are deducted as a lump-sum unclassified amount. In addition, proprietary receipts from the public, arising from market-oriented or business-type activities of the Government, are unclassified and offset against total outlays to highlight the net impact of the budget. RELATIONSHIP TO CAPITAL BUDGET The U.S. Government does not produce a capital budget in the sense of a long-range program for the acquisition of assets, with separate financing of capital outlays. Some foreign governments and some State and local governments fund a portion of their capital expenditures by separate borrowing and exclude most or all such expenditures from their computation of budget totals, except for annual charges to amortize^ these capital outlays over a number of years. While not a precise measure of the difference between capital and current items, this analysis does provide useful general magnitudes. However, it does not make any allowance for depreciation and obsolescence on existing physical assets, anticipated losses on loan programs, or profit or loss on sales of assets at figures different from their book value. Agencies record such allowances for transactions only where the data will serve program and management needs, as in the case of the public enterprise funds. As a result, it is not possible to determine directly from this analysis the net addition to the value of federally owned assets. Recoverability of outlays.—-In general, Government outlays for assets are not expected to be recovered by specific revenues. However, most loans, investment in commodity inventories, the construction of powerplants, and outlays for range and forest improvements on public domain and national forest lands are offset in whole or in part by receipts to the Treasury through repayments and sales, specific charges, or recoveries. Where activities are carried on through revolving funds, such as in the case of most loan programs, receipts are credited directly against disbursements and only the difference is 46 THE BUDGET FOR FISCAL YEAR 1971 included in the total of outlays in the budget and in this analysis. All other receipts from the public arising from market-oriented or businesstype activities of the Government are offset against total outlays. Whether recovered by specific revenues or not, investment and developmental outlays for both physical and human capital add to the wealth and income of the Nation, and by helping to expand the tax base, augment the Government's potential future revenues. However, this analysis does not attempt to measure the degree of recoverability of developmental outlays, the potential gain in public revenues that will be forthcoming from them, nor the duration of future benefits and their discounted present value. Table D-2. SUMMARY OF INVESTMENT, OPERATING, AND OTHER BUDGET OUTLAYS (in millions of dollars) Outlays 1969 actual 1970 estimate 1971 estimate INVESTMENT-TYPE OUTLAYS Additions to Federal assets: Civil: Loans and otherfinancialinvestments Physical assets: Public works _ Major commodity inventories Major equipment and other physical assets National defense Additions to State, local, and private assets: Civil National defense Developmental outlays: Civil National defense Subtotal, investment-type outlays: Civil National defense 3,374 4,122 2,013 2,186 353 370 26,645 2,426 554 410 23,830 2,961 -77 495 21,140 6,659 17 7,193 14 7,617 15 15,482 9,186 16,502 8,994 17,277 9,030 28,424 35.848 31,207 32,838 30,286 30,185 23,355 1,705 38,571 28,228 1,468 43,524 31,071 1,408 49,229 16,716 -628 -11 -3,099 4,545 44,912 18,940 19,142 -1,041 -3,781 5,451 46,430 -4,273 5,872 43,698 79,448 46,617 91,554 47,898 100,000 45,106 CURRENT OUTLAYS Current expenses for aids and special services: Civil National defense Retirement and social insurance benefits—civil Other services and current operating expenses: Civil: Interest Interest on Government capital in enterprises (—) Interest on capital in enterprise (—) Interest received by trust funds (—) Other _._ _ National defense Subtotal, current outlays: Civil National defense See footnotes at end of table. SPECIAL 47 ANALYSES Table D-2. S U M M A R Y OF INVESTMENT, OPERATING, A N D OTHER B U D G E T OUTLAYS (in millions of dollars)—Continued Outlays 1969 1970 1971 UNCLASSIFIED ITEMS Payments to other funds Allowances: Revenue sharing Civilian and military pay increases Contingencies Employer share, employee retirement (—)_ Proprietary receipts from the public (—) *_ Total budget outlays. 19 20 19 1,,400 -2,018 -3,781 175 300 -2,307 -3,800 900 -2,366 -5,034 184,556 197,885 200,771 275 1 Excludes loan repayments deposited in miscellaneous receipts and offset in the loan and expenditure account as follows: 1969 1970 1971 Loan repayments offset in the loan account —249 — 232 —254 Repayments offset in the expenditure account (net of adjustments).- —161 —179 —250 Table D-3. INVESTMENT, OPERATING, AND OTHER BUDGET OUTLAYS (in millions of dollars) Description 1971 1969 1970 actual estimate Investment-type outlays ADDITIONS TO FEDERAL ASSETS Loans: Loan account—civil: To domestic and private borrowers: Department of Agriculture: Commodity Credit Corporation: Storage facilities loans _ _. Export credit sales Rural Electrification Administration Farmers Home Administration: Direct loans Rural housing insurance Emergency credit revolving fund Agricultural credit insurance ___ Other 1 Soil Conservation Service__ _ _ __. Department of Commerce: Economic development assistance: Industrial development loans and guarantees Maritime Administration Department of Health, Education, and Welfare: Office of Education: Higher education facilities loans and other Social and Rehabilitation Service Department of Housing and Urban Development: Renewal and housing assistance: Rehabilitation loans College housing See footnotes at end of table. 82 3 229 -2 31 349 -36 28 325 -18 61 9 204 1 2 -21 316 -53 -30 -4 2 -28 -695 -10 -142 -9 1 24 -7 52 -9 32 -7 52 3 59 4 76 19 25 67 41 98 37 24 48 THE BUDGET FOR FISCAL YEAR 1971 Table D-3. INVESTMENT, OPERATING, AND OTHER BUDGET OUTLAYS (in millions of dollars)—Continued Description 1969 actual 1970 estimate 1971 estimate Investment-type outlays—Continued ADDITIONS TO FEDERAL ASSETS—Continued Loans—Continued Loan account—civil—Continued To domestic and private borrowers—Continued Department of Housing and Urban Development—Con. Mortgage credit: Special assistance functions Management and liquidating functions _ Participation sales. __ _. Secondary market operations trust fund _._ Federal Housing Administration . _ _ __ Housing for the elderly or handicapped Community disposal operations. __ Metropolitan development __ __ . __ General Services Administration: Surplus real property credit sales and other Veterans Administration: Loan guaranty revolving fund. Veterans direct loans. . .. _ . . . __ National service life insurance. . . . __ _ _ 1 Other _ Civil Service Commission: Retirement and disability fund. Farm Credit Administration: Banks for cooperatives Federal intermediate credit banks.. _ _ __ Railroad Retirement Board (trust fund) Small Business Administration: Business loans and investment Disaster loans _ ._ _. Other agencies Total to domestic and private borrowers.._^___ To State and local governments: Department of Agriculture: Farmers Home Administration: Direct loans and other Department of Commerce: Industrial development loans and guarantees Department of Health, Education, and Welfare: Office of Education: Higher education facilities loans and other. _ Department of Housing and Urban Development: Renewal and housing assistance: Urban renewal fund Low-rent public housing . College housing . .. Metropolitan development: Public facility loans and other . . . . Department of Transportation: Federal Highway Administration: Right-of-way trust fund Urban Mass Transportation Administration. _ District of Columbia: Capital outlay loans Other agencies Total to State and local governments. _ To foreign borrowers: Export-Import Bank Total loan account—civil See footnotes at end of table. 442 114 -293 177 19 79 1 509 -104 550 -196 -4 54 -1 2 60 39 -1 6 28 22 142 47 59 5 -595 129 69 64 7 -203 -74 56 9 46 158 57 38 123 -278 -50 -11 -6 25 744 1,787 -7 -36 63 66 25 18 37 22 40 31 34 37 13 82 7 * 66 46 12 47 44 37 34 40 35 -4 * 65 11 5 103 7 * 146 7 372 366 398 718 1,481 2,902 408 311 683 49 SPECIAL ANALYSES Table D-3. INVESTMENT, OPERATING, AND OTHER BUDGET OUTLAYS (in millions of dollars)—Continued Description 1971 1970 1969 Investment-type outlays—Continued ADDITIONS TO FEDERAL ASSETS—Continued Loans—Continued Loan account—national defense: To domestic and private borrowers: Other agencies Expenditure account—civil: To domestic and private borrowers: Department of Agriculture: Commodity Credit Corporation: Price support loans Department of Health, Education, and Welfare: National Institutes of Health: Health manpower Other Office of Education: Higher education Other agencies.-_ Total to domestic and private borrowers To State and local governments: Other agencies To foreign borrowers: Funds appropriated to the President: Economic assistance. Department of Agriculture: Commodity Credit Corporation: Public Law 480 credit sales Other agencies -4 -2 * 400 -459 -428 18 4 135 8 25 106 11 602 -293 -286 2 18 21 931 851 807 419 402 396 23 19 159 1 ' -3 -3 -1 Total to foreign borrowers 1,347 1,249 1,202 Total loan repayments deposited in miscellaneous receipt accounts (net of adjustments) -161 -168 -214 Total expenditure account—civil 1,789 806 723 * * 8\ 238 -11 -36 57 70 202 3,322 3,776 1,608 74 36 10 150 90 16 185 -4 -4 __ Expenditure account—national defense: To domestic and private borrowers: Other agencies -I To foreign borrowers: Funds appropriated to the President: Military assistance 58 Total loan repayments deposited in miscellaneous receipt accounts Total expenditure account—national defense __ Total loans Other financial investments—civil: Investments in quasi-public institutions, trust funds, and international institutions: Funds appropriated to the President: Inter-American DeveloDment Bank International Development Association Asian Development Bank Provision for exDanded multilateral assistance Department of Labor See footnotes at end of table. 90 20 40 -3 50 THE BUDGET FOR FISCAL YEAR 1971 Table D-3. INVESTMENT, OPERATING, AND OTHER BUDGET OUTLAYS (in millions of dollars)—Continued Description 1969 actual 1970 estimate 1971 estimate Investment-type outlays—Continued ADDITIONS TO FEDERAL ASSETS—Continued Other financial investments—civil—Continued Investments in quasi-public etc—Continued Department of Transportation: Civil supersonic aircraft development Farm Credit Administration: Short-term credit investment Banks for cooperatives investment -64 -28 Total investments in quasi-public institutions, trust funds and international institutions 105 163 275 415 607 102 18 12 122 18 9 771 45 25 23 752 44 18 20 898 55 30 19 14 21 23 36 22 28 29 19 42 40 21 38 40 20 33 165 30 6 109 24 37 135 28 12 98 40 93 197 18 9 94 35 46 72 1 41 134 * 130 65 58 278 60 143 60 93 364 59 246 1 162 72 71 496 66 2,186 2,426 2,961 81 Public works—sites and direct construction: Civil: Department of agriculture: Forest Service: Roads and trails Other 1 _ _ _-_ Other _ ------: Department of Defense—Civil: Corps of Engineers: Construction, general Flood control, Mississippi River and tributaries Construction, local funds (trust funds) Other 1 .. __. Department of Health, Education, and Welfare: Indian health facilities Other 1 .Department of the Interior: Bureau of Indian Affairs: Construction: Schools and other Road construction National Park Service 1 Bureau of Reclamation: Construction and rehabilitation Upper Colorado River storage project Other ! „ . . -.--.----: Bonneville Power Administration * Other -. Post Office Department Department of Transportation: Coast Guard: Acquisition, construction, and improvements Federal Aviation Administration Other .--.- — : : — --.General Services Administration: Public buildings National Aeronautics and Space Administration Veterans Administration: Hospitals and other Tennessee Valley Authority Other agencies _ Total public works, civil See footnotes at end of table. 165 36 51 SPECIAL ANALYSES Table D-3. INVESTMENT, OPERATING, AND OTHER BUDGET OUTLAYS (in millions of dollars)—Continued Description 1969 actual 1970 estimate 1971 estimate Investment-type outlays—Continued ADDITIONS TO FEDERAL ASSETS—Continued Public works—sites and direct construction—Continued National defenseDepartment of Defense—Military: Military construction Family housing _ Other Atomic Energy Commission 1,365 136 2 1,093 150 2 1.116 131 2 243 293 275 Total public works, national defense.._ 1.746 1,538 1,525 Total public works—sites and direct construction 3,932 3,964 4,486 337 16 500 53 -119 42 353 554 -77 National defense: Funds appropriated to the President: Expansion of defense production _ Other agencies. 169 26 21 25 -157 Total major commodity inventories, national defense 195 46 -129 Total major commodity inventories 548 599 -205 25 24 2 148 21 159 52 4 5 51 57 14 23 187 239 261 23.988 168 21.550 180 18.904 188 Total major equipment, national defense 24.156 21.730 19.092 Total major equipment 24.343 21.969 19.353 __ Major commodity inventories: Civil: Department of Agriculture: Commodity Credit Corporation. Department of the Interior: Helium fund Total major commodity inventories, civil 28 Major equipment: Civil: Department of Commerce: Environmental science services administration: Satellite operations and other Other -Post Office Department Department of Transportation: Federal Aviation Adm inistration Other agencies - Total major equipment, civil National defense: Department of Defense—Military: Procurement Atomic Energy Commission See footnotes at end of table. _ t 101 52 THE BUDGET FOR FISCAL YEAR 1971 Table D-3. INVESTMENT, OPERATING, AND OTHER BUDGET OUTLAYS (in millions of dollars)—Continued Description 1970 1969 1971 Investment-type outlays—Continued ADDITIONS TO FEDERAL ASSETS—Continued Other physical assets—acquisition and improvement: Civil: Department of Agriculture: Reforestation and range improvements and other Department of Housing and Urban Development: Mortgage credit and other Department of the Interior: Land and water conservation Other 1 ..... .--.- — : General Services Administration: Sale of fixed assets—surplus real property credit sales. __ Real property activities... t Veterans Administration Other agencies 1 44 59 67 74 50 60 78 34 107 28 159 38 -28 2 -12 -10 -45 2 -16 -15 -52 2 -28 -12 Total other physical assets, civil_ 183 171 234 National defense: Department of Defense—^Military.. Atomic Energy Commission 5 490 5 444 1 449 Total other physical assets, national defense 495 448 450 Total other physical assets—acquisition and improvement. 678 683 26,532 Total additions to Federal assets ADDITIONS TO STATE, LOCAL, AND PRIVATE ASSETS State and local assets: Civil: Funds appropriated to the President: Appalachian regional development Public works acceleration Department of Agriculture: Watershed improvement Flood prevention Rural water and waste disposal grants Other ----Department of Commerce: Economic development facilities and other Department of Health, Education, and Welfare: Health Services and Mental Health Administration: Medical facilities construction Other National Institutes of Health: Construction of health educational research, and library facilities Office of Education: Elementary and secondary education Higher education Other Social and Rehabilitation Service Department of Housing and Urban Development: Renewal and housing assistance: Grants for neighborhood facilities See footnotes at end of table. 222 138 2 204 4 59 22 24 12 75 23 34 15 78 25 31 \7 126 137 156 104 14 114 17 112 18 53 127 130 20 247 26 * 33 244 28 9 27 237 14 17 26 38 53 SPECIAL ANALYSES Table D-3. INVESTMENT, OPERATING, AND OTHER BUDGET OUTLAYS (in millions of dollars)—Continued Description 1969 1971 1970 Investment-type outlays—Continued ADDITIONS TO STATE, LOCAL, AND PRIVATE ASSETS—Continued State and local assets—Continued Civil—Continued Department of Housing and Urban Development—Con. Metropolitan development: Grants for basic water and sewer facilities Open space land programs _._ New community assistance _. Department of the Interior: Construction grants for waste treatment works and other pollution control Land and water conservation Administration of territories Other ...... Department of Transportation: Federal Aviation Administration: Airways and airports... Federal Highway Administration: Highway trust fund.. __ State and community highway safety programs Forest highways Other 1 . . .— Urban Mass Transportation Administration Intergovernmental agencies: Federal contribution, Washington Metropolitan Area Transit Authority Other agencies Total State and local assets, civil. National defense: Department of Defense—MilitaryTotal State and local assets Private assets: Civil: Funds appropriated to the President: Appalachian regional development programs Department of Agriculture: Soil conservation Agricultural stabilization and conservation Other Department of Commerce: Ship construction.__ Department of Defense—Civil: Columbia River flood control Department of Health, Education, and Welfare: Health Services and Mental Health Administration: Mental health Medical facilities construction National Institutes of Health Office of Education: Higher education and research and training Other National Science Foundation See footnotes at end of table. 55 1 146 71 2 139 44 17 1 166 73 23 3 366 89 32 7 104 92 139 4,067 18 31 8 136 4,335 64 24 4.252 63 12 130 257 6 19 20 27 122 31 5,571 6,234 6,736 16 14 15 5,588 6,248 6,751 18 33 26 133 3% -1 97 144 313 -2 266 -26 43 119 18 19 147 90 112 15 150 84 17 158 69 17 137 72 69 7 56 67 12 36 67 25 24 52 54 THE BUDGET FOR FISCAL YEAR 1971 Table D-3. INVESTMENT, OPERATING, AND OTHER BUDGET OUTLAYS (in millions of dollars)—Continued Description 1969 actual 1970 estimate 1971 estimate Investment-type outlays—Continued ADDITIONS TO STATE, LOCAL, AND PRIVATE ASSETS—Continued Private assets—Continued Civil—Continued Other agencies 12 21 12 959 881 959 881 6,676 7,207 7,633 3 1,232 97 10 1,290 130 23 700 171 29 11 38 8 43 6 134 35 127 242 46 37 92 30 20 157 20 181 214 79 22 101 17 20 23 64 109 25 20 169 5 215 234 91 25 110 11 19 23 62 159 22 18 96 ,757 55 261 567 181 119 43 14 35 1,789 58 322 711 138 75 46 26 30 Total private assets, civil National defense: Atomic Energy Commission (trust fund). Total private assets Total additions to State, local, and private assets OTHER DEVELOPMENTAL EXPENDITURES Education, training, and health: Civil: Funds appropriated to the President: Appalachian regional development programs Economic opportunity program . Department of Agriculture: Extension service Department of Health, Education, and Welfare: Consumer Protection and Environmental Health Service: Environmental and air pollution control Other—---.—.Health Services and Mental Health Administration: Mental health Health services research and development Comprehensive health planning and services Maternal and child health Regional medical programs Communicable diseases Indian health services _ Chronic diseases 1 Other _ National Institutes of Health: National Heart and Lung Institute National Institute of General Medical Sciences Health manpower National Library of Medicine National Institute of Neurological Diseases and Stroke OtherOffice of Education: Elementary and secondary education Education for the handicapped Vocational and adult education Higher education Education professions development Community education Salaries and expenses Civil rights education Other See footnotes at end of table. 25 62 76 17 21 67 44 260 440 30 93 42 8 39 55 SPECIAL ANALYSES Table D-3. INVESTMENT, OPERATING, AND OTHER BUDGET OUTLAYS (in million, of dollar!)—Continued Description 1969 actual 1970 estimate 1971 estimate Investment-type outlays—Continued OTHER DEVELOPMENTAL EXPENDITURES—Continued Education, training, and health—Continued Civil—Continued Department of Health, Education, and Welfare—Continued Social and Rehabilitation Service: Grants to States for public assistance .. Rehabilitation services and facilities Research and training __ Assistance to refugees in the United States Other . Social Security Administration 1 Other -.. Department of Housing and Urban Development: College housing fund: Interest subsidies Other Department of the Interior: Bureau of Indian Affairs: Education and welfare services.. Other -_-_-Department of Labor: Manpower Administration: Manpower training activities: Grants and contracts Manpower Administration operating expenses and other.. Veterans Administration: Medical care and other National Foundation on the Arts and the Humanities 1 National Science Foundation Other agencies x Total education, training, and health, civil National Defense: Atomic Energy Commission and other Total education, training, and health Research and development: Civil: Funds appropriated to the President: Economic opportunity program Other Department of Agriculture: Agriculture Research Service x Cooperative State Research Service Forest Service Other 1 Department of Commerce: Environmental Science Services Administration National Bureau of Standards Other . Department of Health, Education, and Welfare: Consumer Protection and Environmental Health Service: Air pollution control Other Health Services and Mental Health Administration: Mental health _ ._ Health services research and development Other National Institutes of Health See footnotes at end of table. 2.315 350 29 17 1 2 2,644 487 28 18 2 21 32 2,892 540 30 25 2 24 40 53 * 61 5 79 5 117 14 148 14 167 \7 374 26 77 12 148 61 412 36 92 23 148 84 1,322 39 99 40 143 93 8,805 9,906 10,956 18 17 15 8,822 9,923 10,971 17 11 38 20 60 24 156 58 40 18 156 61 43 22 161 72 47 23 26 28 17 28 30 18 29 30 19 24 34 41 46 51 47 100 11 45 859 112 35 44 881 116 44 42 906 56 THE BUDGET FOR FISCAL YEAR 1971 Table D-3. INVESTMENT, OPERATING, AND OTHER BUDGET OUTLAYS (in millions of dollars)—Continued Description 1969 actual 1970 estimate 1971 estimate Investment-type outlays—Continued OTHER DEVELOPMENTAL EXPENDITURES—Continued Research and development—Continued Civil—Continued Department of Health, Education, and Welfare—Continued Office of Education: Research and training and other Social and Rehabilitation Service: Research and training and other Social Security Administration Department of Housing and Urban Development Department of the Interior: Geological Survey Bureau of Mines: Development of mineral resources and other l Bureau of Commercial Fisheries Office of Saline Water: Saline water conversion Federal Water Polution Control Administration Other 1 .. Post Office Department Department of Transportation: Federal Aviation Administration Federal Highway Administration Other --:-—.National Aeronautics and Space Administration — Veterans Administration National Science Foundation1 Other agencies1 93 97 99 40 6 9 41 7 18 52 8 26 35 39 40 36 30 26 25 44 21 44 23 26 31 45 27 57 32 22 34 53 41 43 27 26 4,187 52 39 60 3,832 59 300 68 71 60 53 64 3,343 61 320 87 Total research and development, civil _ 6,492 6,392 6,124 National defense: Department of Defense—Military: Military personnel__ ... Research, development, test, and evaluation. Other Atomic Energy Commission 295 7,457 10 1,406 322 7,300 7 1,348 306 7,382 8 1,372 9,168 8,977 9,015 15,660 15,369 15,138 27 36 30 49 24 47 47 -9 51 26 50 50 56 29 45 48 -12 185 205 197 Total other developmental expenditures 24,668 25,496 26,307 Total investment-type outlays 64,272 64,045 60,471 Total research and development, national defense _ Total research and development 51 280 Engineering and natural resources surveys—civil: Department of Defense-yCivil: Corps of Engineers. Department of the Interior: Geological Survey Federal Water Pollution Control Administration . Otheri.._ Other agencies 1 Intragovernmental transactions (—) Total engineering and natural resources surveys. See foo end of table. 57 SPECIAL ANALYSES Table D-3. INVESTMENT, OPERATING, AND OTHER BUDGET OUTLAYS (in millions of dollars)—Continued Description 1969 actual 1970 estimate 1971 estimate Current Outlays CURRENT EXPENSES FOR AIDS AND SPECIAL SERVICES Agriculture—citil: Department of Agriculture: Consumer and Marketing Service: Removal of surplus agricultural commodities Other 1 ... _. Foreign Agricultural Service Agricultural Stabilization and Conservation Service: Sugar Act program Commodity Credit Corporation: Price support and related programs National Wool Act... _ Other.... ;-.-----. Rural Electrification Administration: Loans and other.._ Farmers Home Administrationx Other1 Farm Credit Administration1 Other agencies.. _ _ Intragovernmental transactions (—) Total agriculture. Business—ciril: Department of Commerce: Bureau of the Census _ Patent Office Maritime Administration: Ship operation subsidies Other Other 1 .. Department of Defense—Civil: Corps of Engineers: Operation and maintenance The Panama Canal — Post Office Department Department of Transportation: Coast Guard: Navigation aids and other * ._. Federal Aviation Administration: Operations and other 1 Other -....... . Civil Aeronautics Board: Payments to air carriers Small Business Administration: Business loans and investments and other Other agencies _ Federal interfund transactions (—) Total business. 415 53 24 471 59 25 462 56 28 87 147 93 152 133 3,296 68 6 85 9 63 -57 3,500 58 12 -6 13 -3 4,200 4,589 5,415 25 42 22 47 24 49 195 4 62 206 9 72 193 11 75 136 -25 57 170 -19 200 192 -16 -787 349 639 380 746 6 44 6 37 374 844 8 31 138 -1 -15 79 38 -19 91 15 -22 1,655 1,975 ,082 29 99 124 9 16 34 618 69 696 71 759 79 18 20 117 65 __* 4,286 65 9 15 195 64 14 Labor-aril: Department of Health, Education, and Welfare: Work incentives --. Department of the Interior: Bureau of Mines: Health and safety Department of Labor: Manpower Administration: Unemployment trust fund and other1 Other fo nd of table. 58 THE BUDGET FOR FISCAL YEAR 1971 Table D-3. INVESTMENT, OPERATING, AND OTHER BUDGET OUTLAYS (in millions of dollars)—Continued 1969 actual Description 1970 estimate 1971 estimate Current Outlays—Continued CURRENT EXPENSES FOR AIDS AND SPECIAL SERVICES—Continued Labor civil—Continued Equal Employment Opportunity Commission _ Total labor. Homeowners and tenants—civil: Funds appropriated to the President Department of Housing and Urban Development: Renewal and housing assistance: Rehabilitation loans Low-rent public housing Mortgage credit: Rent supplement program.. Homeownership and rental housing assistance. Federal Housing Administration fund Special assistance functions Secondary market operations (trust fund) Other __ Federal Insurance Administration __. Other Federal Home Loan Bank Board Intragovernmental transactions (—) Total homeowners and tenants _ 13 18 895 1,013 -1 339 -1 457 -2 634 5 1 -226 -11 19 19 -246 36 41 102 -280 67 -13 -19 27 -143 -23 __* 35 -111 -450 137 464 22 24 26 4,899 \\ 28 -234 5,292 974 1,523 236 -37 -35 594 82 12 24 -129 5,342 1,179 1,543 238 -37 -35 620 80 25 20 -130 7,551 8,559 8,870 991 892 105 101 890 -16 100 555 569 456 733 -1 -194 -29 -33 21 -308 -13 Veterans—civil: Department of Defense—Civil Veterans Administration: Compensation and pensions Readjustment benefits Medical care General operating expenses Veterans reopened insurance fund Veterans special term insurance fund National service life insurance fund United States Government life insurance fund. Other L . . Other agencies Intragovernmental transactions (—) Total veterans. International aids: Civil: Funds appropriated to the President: Economic assistance x Private investment assistance Peace Corps * Department of Agriculture: Commodity Credit Corporation: Public Law 480 donations of agricultural commodities and other See footnotes at end of table. 681 1,363 205 -36 -35 568 78 59 SPECIAL ANALYSES Table D-3. INVESTMENT, OPERATING, AND OTHER BUDGET OUTLAYS (in millions of dollars)—Continued Description 1970 1969 1971 stimate Current Outlays—Continued CURRENT EXPENSES FOR AIDS AND SPECIAL SERVICES—Continued International aids—Continued Civil—Continued Export-Import Bank of the United States_ Other agencies 1 -120 37 -117 47 -116 37 1.569 1,492 1.352 1,690 15 1,445 24 1,381 27 Total international aids, national defense 1,705 1.468 1,408 Total international aids 3,274 2.960 2.760 Total international aids, civil. National defense: Funds appropriated to the President: Military assistance * Department of Defense—Military: Military construction. __ __ Welfare aids—civil: Funds appropriated to the President: Disaster relief.._ Department of Agriculture: Special milk program Child nutrition programs _-_ Food stamp program _ Department of Health, Education, and Welfare: Social and Rehabilitation Service: Grants to States for public assistance Programs for the aging Assistance to refugees in the United States Other Social Security Administration: Special benefits for disabled coal miners ----: Family assistance legislation Department of the Interior: Bureau of Indian Affairs: Education and welfare services Total welfare aids . Other aids and special services—civil: Funds appropriated to the President: Appalachian regional development programs Economic opportunity program 1 Department of Agriculture: Forest Service Department of Commerce: Bureau of the Census: Nineteenth decennial census and other l Economic development assistance.__ Department of Health, Education, and Welfare: Health Services and Mental Health Administration: Patient care and special health services Mental health Other 1 Social and Rehabilitation Service: Work incentives See footnotes at end of table. 20 145 115 102 237 248 81 302 575 17 314 1,249 3,961 16 47 27 4,831 28 62 42 5,379 27 79 47 20 150 500 42 51 30 4.689 6.128 7,928 4 560 21 5 502 25 22 45 137 52 6 521 24 65 53 73 25 14 39 77 28 15 75 60 THE BUDGET FOR FISCAL YEAR 1971 Table D-3. INVESTMENT, OPERATING, AND OTHER BUDGET OUTLAYS (in millions of dollars)—Continued Description 1969 actual 1970 estimate 1971 estimate Current Outlays—Continued CURRENT EXPENSES FOR AIDS AND SPECIAL SERVICES-Continued Other aids and special services—civil—Continued Department of Health, Education, and Welfare—Continued Social Security Administration: Payment to social security trust funds Federal old-age and survivors insurance trust fund Federal disability insurance trust fund Federal hospital insurance trust fund Federal supplementary medical insurance trust fund Other Other Department of Housing and Urban Development: Renewal and housing assistance: Urban renewal fund Comprehensive planning grants and other metropolitan development Model Cities programs Departmental management and other Department of the Interior: Bureau of Indian Affairs: Resources management Tribal funds (trust funds) Other i Other Post Office Department.... Department of Transportation: Federal Highway Administration: Highway Beautification Highway trust fund Other Other1..... Railroad Retirement Board Other agencies 1 Intragovernmental transactions (—) Total other aids and special services Total current expenses for aids and special services 2,147 454 131 104 194 2,004 484 155 145 214 43 54 2,589 516 164 133 234 * 70 535 1,042 1,036 39 15 35 52 300 49 55 109 18 2 704 60 86 15 3 779 53 530 56 67 66 15 3 803 21 62 18 10 15 15 -2,076 23 66 20 18 17 19 -2,025 25 81 23 28 147 21 -2,581 3,408 4,454 4.947 25,060 29,696 32,479 23,732 2,443 4,654 1,645 97 1,533 26,356 2,798 5,225 1,949 93 1,663 29,706 3,191 6,325 2,078 94 1,669 34,104 38,084 43,063 2,061 2,620 2,947 RETIREMENT AND SOCIAL INSURANCE BENEFITS Insurance benefits—civil: Department of Health, Education, and Welfare: Federal old-age and survivors insurance trust fund Federal disability insurance trust fund Federal hospital insurance trust fund Federal supplementary medical insurance trust fund Department of Labor: Unemployment trust fund Railroad Retirement Board (trust fund) Total insurance benefits Unemployment benefits—civil: Department of Labor: Unemployment trust fund See footnotes at end of table. 61 SPECIAL ANALYSES Table D-3. INVESTMENT, OPERATING, AND OTHER BUDGET OUTLAYS (in millions of dollars)—Continued Description 1969 actual 1970 1971 Current Outlays—Continued RETIREMENT AND SOCIAL INSURANCE BENEFITS—Continued Other retirement and social insurance benefits—civil: Civil Service Commission: Civil service retirement and disability fund Other trust funds Trust interfund transactions (—) _ _ 2,401 15 -10 2,803 18 -1 3,200 21 -1 Total other retirement and social insurance benefits 2,406 2,820 3.219 38,571 43,524 49,229 207 225 224 137 148 133 40 86 64 40 311 -126 64 50 102 73 48 362 -180 61 29 105 76 49 375 -116 61 Total retirement and social insurance benefits OTHER SERVICES AND CURRENT OPERATING EXPENSES Repair, maintenance, and operation of physical assets (excluding special services): Civil: Department of Agriculture: Forest Service * Department of Defense—Civil: Corps of Engineers and other... Department of the Interior: Bureau of Land Management* _. National Park Service 1 l Bureau of Reclamation Other General Services Administration: Public buildings Tennessee Valley Authority Other agencies 1 Total repair, maintenance, and operation of physical assets, civil National defense: Department of Defense—Military: Operation and maintenance Family housing. ._ Atomic Energy Commission General Services Administration 822 937 22,185 336 122 * 21,461 382 173 * 19,611 411 157 * Total repair, maintenance, and operation of physical assets, national defense 22,644 22,016 20,179 Total repair, maintenance, and operation of physical assets 23,466 22,904 21,116 109 129 134 85 92 4 89 118 6 93 127 6 Regulation and control—civil: The Judiciary Department of Agriculture: Agricultural Research Service l Consumer and Marketing Service * Other See footnotes at end of table. 62 THE BUDGET FOR FISCAL YEAR 1971 Table D-3. INVESTMENT, OPERATING, AND OTHER BUDGET OUTLAYS (in millions of dollars)—Continued 1970 estimate 1969 actual Description 1971 estimate Current Outlays—Continued OTHER SERVICES AND CURRENT OPERATING EXPENSES—Continued Regulation and control—civil—Continned Department of Health, Education, and Welfare: Consumer Protection and Environmental Health Service: Food and drug control Air pollution control and other Utner Department of Justice: Legal activities and general administration Federal Bureau of Investigation Immigration and Naturalization Service. _ Federal Prison System 1 Law Enforcement Assistance Administration Bureau of Narcotics and Dangerous Drugs Department of Transportation: Coast Guard .. Federal Aviation Administration Other Treasury Department: Bureau of Customs 1 __ Secret Service __ ___ _ _ 1 Other Federal Deposit Insurance Corporation (trust fund) Interstate Commerce Commission. __ National Labor Relations Board l Other agencies _ ___ Total regulation and control __ Other operation and administration: Civil: International activities: Department of State: Administration of foreign affairs 1 International organizations and conferences Educational exchange * Other United States Information Agency * Other agencies 53 22 l -- Total international activities Federal financial activities: Legislative branch: General Accounting Office Treasury Department: Bureau of Accounts * Bureau of Customs _ Bureau of the Mint _ _ Bureau of the Public Debt Internal Revenue Service _ Other Other agencies Total Federal financial activities See footnotes at end of table. . _ -- -- 52 28 60 41 L Z L 85 214 90 51 22 16 104 242 102 59 152 26 113 251 109 66 320 31 43 46 6 48 56 7 55 62 8 14 23 -313 25 34 132 22 32 -3 -333 27 38 153 25 43 -2 -359 26 37 163 854 1,154 1.408 214 127 41 226 139 34 176 12 185 8 226 155 38 2 188 9 572 594 617 59 69 74 46 95 16 57 746 15 -4 46 113 21 64 848 19 -2 47 125 26 68 904 18 -4 1.029 1,177 1,257 2 63 SPECIAL ANALYSES Table D-3, INVESTMENT, OPERATING, AND, OTHER BUDGET OUTLAYS (in millions of dollars)—Continued Description 1969 1970 1971 Current Outlays—Continued OTHER SERVICES AND CURRENT OPERATING EXPENSES—Continued Other operation and administration—Continued Civil—Continued Other direct Federal programs: Legislative branch 1 Executive Office of the President _ Department of Commerce: Environmental Science Services Administration * National Bureau of Standards _ Department of Defense—Civil _ 1 Department of the Interior . _ . _ ! Treasury Department: Bureau of Accounts and other _ __ General Services Administration *_ _ Civil Service Commission: Salaries and expenses and other * Employees life insurance trust fund Retired employees' health benefits trust fund Other agencies * Intrabudgetary transactions (—) 204 26 247 34 262 40 103 6 60 44 62 146 113 11 67 52 156 142 119 12 70 56 66 120 25 -152 1 9 _* 65 -147 -26 13 56 -154 -2 14 ___ 536 726 661 Retirement, unemployment, and accident compensation for Federal employees: Department of Labor: Unemployment compensation for Federal employees and ex-servicemen and trade adjustment activities Employees' compensation claims and expenses Department of Transportation: Coast Guard: Retired pay. Civil Service Commission: Special payments and annuities_ Other agencies _ ___ I ntr a governmental transactions (—) 126 67 53 114 14 -72 185 81 60 115 16 -73 200 85 64 284 20 -236 302 384 417 53 79 87 78 43 31 1 88 46 33 1 92 52 49 1 35 80 85 23 43 87 127 24 49 87 133 28 429 528 576 2,868 3,409 3,528 Total other direct Federal programs, Total retirement, unemployment, and accident compensation for Federal employees _ Shared revenues and grants-in-aid: Department of Agriculture: Forest Service Department of the Interior: Bureau of Land Management Office of Territories Bureau of Sport Fisheries and Wildlife Other Treasury Department: Bureau of Customs Internal Revenue Service District of Columbia: Federal payment Other agencies -Total shared revenues and grants-in-aid Total other operation and administration, civil See footnotes at end of table. _ 64 THE BUDGET FOR FISCAL YEAR 1971 Table D-3 INVESTMENT, OPERATING, AND OTHER BUDGET OUTLAYS (in millions of dollars)—Continued Description 1969 actual 1970 estimate 1971 Current Outlays—Continued OTHER SERVICES AND CURRENT OPERATING EXPENSES—Continued Other operation and administration—Continued National defense: Department of Defense—Military: Military personnel Retired pay, defense Operation and maintenance Family housing Civil defense Other1.... Selective Service System Other agencies * Intragovernmental transactions (—) 21,078 2,444 42 94 65 -1,523 65 9 -8 21,979 2,857 39 93 58 -693 74 20,605 3,193 39 80 58 -537 75 13 -7 11 -7 Total operation and administration, national defense- 22,268 24,414 23,519 Total other operation and administration 25.136 27,824 27,047 16,588 18,800 19.000 1 120 7 1 128 11 1 128 13 128 140 142 __ Interest: On the public debt. Other interest: On refunds: Department of the Interior Treasury Department On uninvested funds: Treasury Department. Total other interest l Intrabudgetary transactions (—): Interest on Government capital in enterprises (—) _ Interest on other capital in enterprises Interest received by trust funds (—) -628 -11 -1,041 -3,099 -3,781 -4,273 __. 12,977 14,351 13,827 Total other services and current operating expenses. 62,434 66,232 63,398 126,065 139.452 145,106 19 20 19 -2,018 -3,781 175 300 -2.307 -3,800 -2.366 -5,034 184,556 197,885 200,771 Total interest Total current outlays UNCLASSIFIED Payments to other funds 1— Allowances for: Revenue sharing _ Civilian and military pay increases _ Contingenci es Employer share, employee retirement (—). Proprietary receipts from the public (—) 2_ Total budget outlays. 1'"Less than $500 thousand. 2 Includes both Federal funds and trust funds. Excludes loan repayments deposited in miscellaneous receipts and offset in the penditure accounts as follows: 1969 Loan repayments offset in the loan account — 249 Repayments offset in the expenditure account —161 275 1,400 900 loan and ex1970 1971 — 232 —254 —179 —250 SPECIAL ANALYSIS E FEDERAL CREDIT PROGRAMS INTRODUCTION Direct loans and Federal insurance or guarantees of private loans continue to play a major role in Government programs for: (a) improvement of housing and encouragement of homeownership; (b) development of agricultural and other natural resources; (c) assistance to economic development and military preparedness abroad; (d) promotion of business, especially exports, transportation, and small business generally; (e) redevelopment of communities and regions; and (f) aid to higher education. In addition, Government-sponsored private lending agencies provide major credit assistance in the first two of these areas. Federal Credit Programs New Commitments for Direct Loans and Guaranteed and Insured Loans Total Direct Loans—Expenditure Account I960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 Fiscal Years Estimate 65 390-700 O—70 5 66 THE BUDGET FOR FISCAL YEAR 1971 Federal credit programs help borrowers to help themselves. In several programs, credit aids are part of a package of Federal assistance. Such a package sometimes also includes, for example, grants to provide necessary public facilities for depressed areas; grants for work-training, education, and other types of community action to help combat poverty; technical aids to help underdeveloped countries plan and construct basic transportation systems; or management advice to help rural residents plan, develop, and operate their farms productively. From 1961 through 1968, the overall level of Federal credit assistance—measured by the volume of direct loans and of guarantees and insurance of private loans—rose steadily at a rate comparable to the rise in the gross national product. This reflected both broadening of many existing programs and initiation of new programs to meet emerging needs. During the fiscal year 1969 the Secondary Market Operations Trust Fund of the Federal National Mortgage Association, the Federal intermediate credit banks and the banks for cooperatives were converted from mixed-ownership to wholly private enterprises. As a result, only part of their operations in 1969 and none in 1970 or 1971 are included in the budget. Tables E-l, E-2, and E-3 reflect in total and detail the impact of this shift from public to private status. The increasing emphasis on private financing has also caused major changes in the package of credit assistance made available in recent years. These changes would be extended still further by proposed legislation. Instead of relying primarily on direct loans with their major immediate budgetary impact, Federal agencies are encouraging greater private financing by undertaking to guarantee or insure such private funds against loss, to pay a large enough share of the interest cost to enable eligible borrowers to qualify for the loans, or to combine the two approaches. Examples of this approach in existing programs, include: (a) federally insured loans and interest subsidies for college students; (b) insured or guaranteed loans combined with supplementary payments to finance housing for low and moderate income families in both urban and rural areas; and (c) payment of a portion of the interest on privately financed loans for college housing and academic facilities. Other current proposals to apply this approach to Federal aid for other groups are mentioned later in this analysis. SCOPE OF SPECIAL ANALYSIS This analysis: (a) summarizes 1969-71 trends in Federal credit programs; (b) indicates the relationship between the credit programs and overall budget totals; and (c) discusses certain subsidy aspects of credit programs. It provides information on the level and trends of all direct loan and loan guarantee and insurance programs operated by Federal agencies and trust funds—including both currently active programs and programs in process of liquidation. In addition, a final table summarizes net changes in outstanding amounts both of direct Federal loans (included in the budget) and of guaranteed and insured loans and loans made by Governmentsponsored agencies (not reflected in budget outlays). SPECIAL ANALYSES 67 The principal disbursements and repayments of most of the direct Federal loans covered by this analysis are included in the loan account. In addition, in line with the recommendations of the 1967 Commission on Budget Concepts, two specific types of direct loan programs, accounting for about one-third of direct loan commitments in 1970 and 1971, are reflected in the expenditure account; these programs comprise: (a) foreign loans made largely on noncommercial terms; and (b) other loans where the terms of the loan contract make repayment in certain respects contingent rather than mandatory. Disbursements, repayments, and net outlays for each appropriation and fund account1 which finance these programs are listed in a table in the Appendix. In the case of programs in the loan account, net lending is also separately identified, for each applicable account, in Part 5 of the budget. As in previous years, the analysis excludes all borrowing operations of Federal agencies, whether from the Treasury or the public. Sales of certificates of participation in pools of loans by the Export-Import Bank and by the Government National Mortgage Association as trustee for several agencies are treated as borrowing. Similarly, beginning with the fiscal year 1970, sales of certificates of interest by the Commodity Credit Corporation, formerly classified as sales of guaranteed loans, are treated as agency borrowing. The tables in the 1971 analysis include only data on loans that are both disbursed and repayable in dollars. The 1970 analysis had also included loans disbursed in dollars but repayable in foreign currency. The change in the analysis is in line with current policy which requires that 2on all new commitments loans disbursed in dollars be repaid in dollars. The 1971 analysis covers credit programs administered by 10 departments and 12 other agencies. The estimates for 1970 and 1971 include credit aid authoiized by legislation enacted during the past year. Such legislation, summarized in the last section of this analysis,3 authorized several important changes in Federal credit programs. The analysis also reflects the impact on credit programs of proposed legislation: (a) authorizing direct loans, loan guarantees, and interest subsidies to help finance modernization and construction of medical facilities; (b) substituting federally supported borrowing from the public in place of direct Federal loans to finance public works and other capital outlays by the District of Columbia; (c) permitting sales of direct loans by the Veterans Administration at prices consistent with market yields; and (d) expanding ship mortgage insurance as part of the program to revitalize the Merchant Marine. Credit assistance would also be provided in unspecified amounts under other proposals: (e) authorizing loans for advance acquisition of necessary land for urban mass transportation projects; (f) establishing a Rural Telephone Bank and authorizing more flexible interest rates for future direct 1 2 See appendix, pp. 1081-84. The level and trends in direct loans of Government agencies disbursed or repayable in foreign currencies are as follows (in millions of dollars): 1969 1970 1971 Outstanding, start of year (dollar equivalent) 5,629 5,825 5,850 Disbursements 334 175 \\7 Repayments—dollars 12 7 7 Repayments—local currencies 125 142 159 Nev disbursements 196 25 —50 Outstanding, end of year 5,825 5,850 5,801 * See pp. 79-80. 68 THE BUDGET FOR FISCAL YEAR 1971 loans to rural telephone borrowers; (g) authorizing Farmers Home Administration to insure taxable obligations and pay interest subsidies on borrowing by public agencies; and (h) establishing an environmental financing authority. NEW COMMITMENTS New commitments are the best single measure of short-run trends in most Federal credit programs. They also often give the best advance indication of trends in the financing impact of these programs, since changes in the level of new commitments frequently precede corresponding changes in the volume of loans disbursed by either public agencies or private lenders and in the purchase of goods and services by the ultimate borrowers. In this analysis, commitments are defined as approvals by Federal agencies of direct loans or of insurance or guarantees of private loans. They are shown on a gross basis, including administrative reservations, commitments that do not later result in actual credit extensions, and the unguaranteed portions of loans partially covered by Federal guarantees. Direct loans.—New commitments for direct loans fall from $15.9 billion in 1969 to $13.3 billion in 1970 and to $12.3 billion in 1971. The sharp drop from 1969 to 1970 reflects primarily (a) the conversion to private ownership of the three major groups of Federal agencies with 1969 commitments of $4.7 billion and (b) nonrecurring 1969 loans of $1.7 billion to the newly private FNMA—all of which were repaid by the end of the fiscal ye&r. On the other hand, commitments of the Export-Import Bank are expected to rise by $1.9 billion in 1970 and by another $0.6 billion in 1971,., Guarantees and insurance.—New commitments for guarantees and insurance of private loans are expected to rise rapidly from $25.3 billion in 1969 to $30.2 billion in 1970 and $39.1 billion in 1971. The 2-year increase is primarily attributable to expansion in the volume of mortgage insurance commitments by the Federal Housing Administration ($6.6 billion), the Veterans Administration ($1.3 billion), and the Farmers IJome Administration ($0.9 billion). These increases, almost entirely for housing purposes, will be made possible in part by the extensive purchases of such obligations by the privately owned FNMA, in both 1970 and 1971, and by the somewhat easier credit conditions anticipated in 1971. In addition, guarantee commitments in urban renewal and public housing programs are expected to rise by $1.2 billion, primarily to accelerate expansion of low-rent public housing construction. Under authority provided in 1968, GNMA expects to guarantee $0.5 billion in 1970 and $1 billion in 1971 in private securities backed by insured housing loans. Outside the housing field, the Export-Import Bank plans by 1971 almost to double the $1.7 billion of commitments made for guaranteed loans in 1969. 69 SPECIAL ANALYSES Table E-1. NEW COMMITMENTS FOR FEDERAL CREDIT PROGRAMS CLASSIFIED BY TYPE OF ASSISTANCE AND ACCOUNT (in millions of dollars) Agency or program 1971 estimate 1970 estimate 1969 actual Direct loans Guaranteed and insured loans Direct loans Guaranteed and insured loans Direct loans Guaranteed and insured loans 226 723 55 216 250 859 100 295 235 1,161 150 535 2,647 225 666 3,057 189 32 EXPENDITURE ACCOUNT Funds appropriated to the President: Military assistance Economic assistance l Agriculture: Commodity Credit Corporation Health, Education, and Welfare Other programs Total, expenditure account. 15 3,837 937 4,387 2,715 164 36 395 4,311 685 LOAN ACCOUNT Funds appropriated to the President: Office of Economic Opportunity Agriculture: Commodity Credit Corporation Rural Electrification Administration Farmers Home Administration.. Commerce: Economic Development Administration. Maritime Administration Health, Education, and Welfare Housing and Urban Development: Renewal and Housing Assistance Metropolitan Development Federal Housing Administration Government National Mortgage Association Federal National Mortgage Association-. Interior General Services Administration Veterans Administration: Housing loans and guarantees Insurance policy loans District of Columbia.. _. Export-Import Bank Farm Credit Administration: Banks for cooperatives __ Federal intermediate credit banks Federal Home Loan Bank Board Small Business Administration Other agencies or programs Obligations of federally sponsored enterprises .__ 13 221 470 489 895 76 1 14 10 142 687 681 45 355 71 94 23 14 200 794 1,987 718 42 2,817 150 14.429 193 636 42 188 16,742 35 1.779 24 300 1.125 3.209 250 21.063 17 45 359 4.017 441 158 150 3.200 ~2."o6o" 470 2 519 532 113 668 5 24.366 8.883 29.838 38.388 25.303 13.280 30.233 39,073 150 110 1,298 1.516 Tra" 500 851 1.000 6 17 52 6 4.200 455 5.300 153 190 3.850 115 3.389 1,059 2,872 38 248 87 * 19 357 71 825 2 132 15.936 •Less than $500 thousand. Including in 1971 the Overseas Private Investment Corporation. 1,136 212 470 415 4 12,099 1 14 2.557 782 14 28 Total, loan accountGrand total 19 223 470 433 70 THE BUDGET FOR FISCAL YEAR 1971 Overlapping commitments.—Total estimated new commitments of $51.4 billion in 1971 include several cases where two or more types of Federal assistance are provided for the same borrower or on the same property or project at different stages in the financing process. For example, commitments by GNMA are for purchase of mortgages insured or guaranteed by other Federal agencies. In several programs, the same authority is used both to make direct loans and to guarantee or insure private loans. This is true of certain programs of the Farmers Home Administration, and in urban renewal and public housing programs of the Department of Housing and Urban Development. In the latter cases, the allocation of direct loan and guarantee commitments is estimated on the basis of past experience. DISBURSEMENTS AND REPAYMENTS Gross disbursements for direct loans have the most immediate impact on the budget. In long-established programs, or in programs involving short-term loans, however, the cash outflow required for such disbursements usually is largely or wholly offset by repayments on the outstanding portfolio of loans. This is true for most of the credit extensions by the Farmers Home Administration and the Commodity Credit Corporation, as well as for the interim financing of public housing and urban renewal projects. On the other hand, long-term loans, such as those to finance construction of college housing and academic facilities or rural electrification and telephone systems, as well as purchases of mortgages to help finance residential housing, can have a major net impact on the budget, since repayments in the early years often fall short of new loans. I o -2.5- 1960 1961 1968 1963 1964 1965 1966 1967 1968 1969 1970 Fiscal Years 1971 Estimate SPECIAL ANALYSES 71 Federal guarantees and insurance of private loans, except when accompanied by interest subsidies, ordinarily have only minor and indirect budget consequences. Principal disbursements of Federal funds normally occur only when the borrower defaults, or in a few programs when holders of such insured loans exercise their repurchase options. In accordance with the recommendations of the Commission on Budget Concepts, both the budget as a whole and this analysis segregate and treat separately net lending—the excess of principal disbursements over collections of all credit programs in the loan account. The gross data on disbursements are also adjusted to reflect writeoffs, losses, and xecoveries. As a result, the net lending in any year equals the change between the loans outstanding in the loan account at the beginning of the year and the total outstanding at the end of the year. The same principles are followed in deriving the gross and net loan expenditures for credit programs in the expenditure account. As a result, the net loan disbursements for all credit programs in the loan account and the totals for the credit programs in the expenditure account are identical with the outlays shown as "loans" in1 the "additions to Federal assets" category in Special Analysis D. For those loan programs in the expenditure account not financed through revolving funds, repayments are sepaiately recorded in miscellaneous receipts, rather than netted against expenditures for each program. Over the 1959-68 period, gross disbursements for all Federal programs in the loan account rose from $7.9 billion to $20.4 billion. Net lending ranged from a low in 1963—when repayments exceeded new loan disbursements by $0.1 billion—to peaks of $5.1 billion in 1967 and $6.1 billion in 1968. ' By contrast, in 1969-71, sharp reductions in the budgetary impact of these programs are occurring. In 1969, gross disbursements dropped to $17.0 billion, followed by a further decline to $13.8 billion in 1970 and $12.6 billion in 1971. All of this decline can be accounted for by^ the conversion to private ownership of three major groups of lending agencies, which disbursed $11.4 billion in loans during 1968 and $4.2 billion in the portion of 1969 prior to their shifts to private ownership. Net lending—the excess of disbursements over receipts in the loan account—in 1969 dropped to $1.5 billion. In 1970, it will increase to $2.9 billion, but will fall in 1971, to $0.7 billion. The decline in 1971 results from the estimated increases of $1.9 billion in sales of direct loans by four agencies, together with a reduction of $0.8 billion in repurchases by two of these agencies. Details by agency are shown at the bottom of table E-2. Net loan outlays in the expenditure account will fall from $1.9 billion in 1969 to $0.9 billion in 1970 and 1971. This is almost entirely the result of reduction in the net loan expenditures of the Commodity Credit Corporation from $0.8 billion in 1969 to a modest excess of repayments in 1970 and 1971. Net loan disbursements for the foreign economic assistance programs of the Agency for International Development will remain relatively unchanged at about $0.8 billion each year. This is partly because most of such loans permit deferment of principal repayments during several early years. 1 See table D-2 on pp. 47-49. 72 THE BUDGET FOR FISCAL YEAR 1 9 7 1 Table £-2. DISBURSEMENTS AND REPAYMENTS FOR FEDERAL CREDIT PROGRAMS CLASSIFIED BY TYPE OF ACCOUNT (in millions of dtllars) 1969 actual Dis- i Repayments bursementt EXPENDITURE ACCOUNT Funds appropriated to the President: Military assistance Economic assistance Agriculture: Commodity Credit Corporation Health, Education and Welfare.. Treasury Department . . Other programs _ Total, expenditure account 1971 estimate !970efltimtte Agency or program Disbursements Repayments Disbursements Repayments 77 957 19 139 139 923 68 116 262 881 59 137 1.801 1 46 12 3,106 160 29 3.163 • 121 12 2.632 135 _ 2,620 201 55 9 39 2.664 1 148 14 _ 3.919 2,018 4.357 3.481 3.948 3.023 9 12 16 12 11 14 221 402 1,765 137 172 1.444 223 505 2.413 194 157 2,140 212 492 2.580 220 167 3,439 50 I 100 8 8 5 99 62 101 10 9 6 137 12 7 8 842 48 297 618 4 277 1.247 44 125 1.035 5 1.050 40 130 129 884 6 71 2.439 249 17 28 1.883 72 5 23 662 256 698 344 17 45 5 18 16 52 5 32 327 150 108 1,668 138 86 43 1.303 396 158 149 2,136 199 87 46 1,418 388 153 190 1,903 664 88 44 1.592 1,059 2,872 36 208 88 934 3.158 15 225 12 519 458 174 524 255 76 19 352 115 24 257 42 132 1.058 13,117 11.640 9.489 6,589 8.604 7,921 17.036 13.659 13.846 10,070 12.552 10.944 830 407 350 1,598 50 61 384 2,914 100 526 500 1.180 2.093 407 4,040 LOAN ACCOUNT Funds appropriated to the President: Office of Economic Opportunity _ Agriculture: Commodity Credit Corporation Rural Electrification Administration Farmers Home Administration Commerce: Economic Development Administration. Maritime Administration . Health, Education, and Welfare Housing and Urban Development: Renewal and Housing Assistance Metropolitan Development Federal Housing Administration Government National Mortgage Association - Federal National Mortgage Association _ Interior General Services Administration Veterans Administration: Housing loans and guarantees Insurance policy loans District of Columbia . _ Export-Import Bank Farm Credit Administration: Banks for cooperatives Federal intermediate credit banks Federal Home Loan Bank Board. Small Business Administration Other agencies or programs _ Obligations of federally sponsored enterprises Total, loan account Grand total _ ___ Repurchases and sales of financial assets included in above totals: Agriculture: Commodity Credit Corporation, net Farmers Home Administration Housing and Urban Development _ Veterans Administration Export-Import Bank Total •Less than $500 thousand. 405 405 667 958 * 1 378 2.005 5 SPECIAL ANALYSES 73 OUTSTANDING DIRECT AND GUARANTEED LOANS The best index of the level of Federal credit programs over a period of years is provided by total outstanding direct and guaranteed loans. By the close of 1971, these will amount to $176.4 billion in the loan account and an additional $22.5 billion in the expenditure account—or a gross total of $198.9 billion. Outstanding direct loans in the loan account will rise by an estimated $2.9 billion during the current fiscal year and by $0.7 billion in 1971, to a total of $33.1 billion on June 30, 1971. Significant increases over the 2-year period include the Export-Import Bank ($1.0 billion), the Rural Electrification Administration and the GNMA (each $0.7 billion), HUD's renewal and housing assistance programs—mainly college housing loans—($0.4 billion) and the Small Business Administration ($0.3 billion). Loans held by the Farmers Home Administration will fall by $0.6 billion. Outstanding loans in the expenditure account will rise by $2.5 billion in 1970 and $0.9 billion in 1971. An increase of $1.5 billion in CCC direct loans results indirectly from reclassification of $1.6 billion in certificates of interest as agency debt. At the same time, the portfolio of foreign economic assistance loans made by the Agency for International Development will rise by $1.6 billion during the 2-year period. Outstanding guaranteed and insured loans for both accounts are expected to rise by an estimated $9.0 billion in 1D70 and by a record $18.3 billion during 1971. The net increase in outstanding loans insured by the Federal Housing Administration ($13.1 billion) accounts for almost half of the 1969-71 rise. Other major increases are anticipated by HUD in its renewal and housing assistance programs ($3.3 billion), the Farmers Home Administration ($2.8 billion), the ExportImport Bank ($2.5 billion), the Veterans Administration ($2.0 billion), the Student Loan Insurance program of the Office of Education ($1.4 billion), and the Small Business Administration ($0.8 billion). The only significant decrease is the elimination of $1.6 billion in guaranteed certificates of interest of the CCC, because of the reclassification of this item. The amounts shown include both the guaranteed and unguaranteed portion of outstanding loans in order to give a more complete picture of the economic impact of these programs and to tie in better with banking statistics. The estimated contingent liability of the Federal Government by the end of 1971 will be $19.9 billion less than the $145.1 billion principal amount of the loans guaranteed and insured. Most of this difference is accounted for by the veterans loan guarantee progrnm, where the Government's liability will be $16.4 billion lower than the amount of guaranteed loans outstanding. INTEREST RATES AND MATURITIES Two of the major ways in which Federal credit programs help achieve program objectives are by providing more favorable interest rates or maturities than many borrowers can obtain from other sources. Table E-4 summarizes the current range of interest rates charged by the various major credit programs on direct loans (or 74 THE BUDGET FOR FISCAL YEAR 1971 Table E-3. OUTSTANDING DIRECT LOANS, AND GUARANTEED AND INSURED LOANS FOR FEDERAL CREDIT PROGRAMS CLASSIFIED BY TYPE OF ACCOUNT (in millions of dolliri) 1969 actual Agency or program Direct loans 1970 estimate Guaranteed Direct loans insured loans Guaranteed insured loans 1971 estimate Direct loans Guaranteed and insured loans 349 9.387 482 1,268 EXPENDITURE ACCOUNT Funds appropriated to the President: Military assistance Economic assistance l Agriculture: Commodity Credit Corporation Health, Education, and Welfare Treasury Department Other programs _ 4.829 245 4.708 262 Total, expenditure account. 17.360 2.345 • 19.826 85 89 87 458 5.026 2.694 487 5,375 2,970 3,266 5.700 2,112 375 73 455 644 2,106 63.001 3.658 406 703 11,220 40 68,203 3.824 440 762 76.080 195 172 18 49 4,661 207 199 500 21 49 5,015 218 219 1,500 24 49 2.650 868 266 5.421 166 34.927 2.848 938 370 6.139 161 1,734 547 35.057 2,571 1.003 516 6.450 155 1,829 619 36.945 77 7.837 366 389 147 8,644 3.046 1.326 1.590 4.579 1.486 457 755 4.547 1.621 4.560 286 1,212 20.751 1.750 LOAN ACCOUNT Funds appropriated to the President: Office of Economic Opportunity Agriculture: Commodity Credit Corporation Rural Electrification Administration Farmers Home Administration. Commerce: Economic Development Administration. Maritime Administration Health, Education, and Welfare Housing and Urban Development: Renewal and Housing Assistance Metropolitan development Federal Housing Administration Government National Mortgage Association Interior _ General Services Administration Veterans Administration: Housing loans and guarantees Insurance policy loans District of Columbia _ Export-Import Bank Federal Home Loan Bank Board Small Business Administration Other agencies or programs Obligations of Federally-sponsored enterprises 286 82 360 3.446 367 708 2.679 25 622 1.394 9.806 4.256 1.531 451 20 2,039 * 603 176 479 39 20 3,218 969 161 428 66 584 5,523 63 775 2,902 13.103 95 135 4.519 1.450 144 Total, loan account. 29.496 115,358 32,395 125,513 33,078 143,306 Grand total 46.856 117,703 52,221 126,725 53,829 145.056 *Less than $500 thousand. l Including, in 1971, the Overseas Private Investment Corporation. 75 SPECIAL ANALYSES prevailing on insured or guaranteed loans) and the customary maturities for both direct and insured and guaranteed loans. These terms are on newly committed loans by currently active programs, and do not necessarily correspond to those on outstanding loans, or on loans covered by commitments made in earlier years. Interest rates charged on direct loans vary both among the numerous Federal credit agencies and sometimes among the types of loans made by a single agency. Some of the differences in rates reflect differences in the cost of providing the loan (including the cost of borrowing the necessary funds), of administering the several types of loans, and of incurring the varying degrees of risk of probable loss. Table E-4. INTEREST RATES AND MATURITIES FOR MAJOR ACTIVE CREDIT PROGRAMS CLASSIFIED BY AGENCY OR PROGRAM, DECEMBER 1969 Guaranteed and insured loans Direct loans Agency or program Interett rate (percent) Maturity (years) interest rate (percent) Maturity (years) EXPENDITURE ACCOUNT Funds appropriated to the President: Military assistance Economic assistance _ _ Agriculture: Commodity Credit Corporation Health, Education, and Welfare 1 5-10 5-40 2-5 MO M-20 414 1-30 9-9i/2 6-9i/2 1-7 5-25 LOAN ACCOUNT Office of Economic Opportunity Agriculture: Commodity Credit Corporation Rural Electrification Administration Farmers Home Administration Commerce: Economic Development Administration Maritime Administration Health, Education, and Welfare Housing and Urban Development: Renewal and Housing Assistance Metropolitan Development Federal Housing Administration Government National Mortgage Association.. Interior General Services Administration Veterans Administration: Housing loans and guarantees Insurance policy loans District of Columbia Export-Import Bank Federal Home Loan Bank Board Small Business Administration _ 5-40 1-50 53/4-6% 12-40 8!/4-8i/2 3-10 20-25 5.6-6.0 1/4-40 9-12 1/2-40 3-6 0-5% O-81/2 ./.-50 1-40 1-40 0-50 8-10 1-40 3-W/2 0-8'/ 2 6I/4-71/2 71/2-81/2 7-30 7-30 0-6'/4 6 4-7.2 6-10 1-30 V2-10 1-30 1 When commodity loan is repaid by forfeiting collateral, no interest it charged. On export loans lower interest is charged during initial grace period. 3 On student loans, maturities begin when student leaves school and exclude period of military. Peace Corps, or Vista service. 1 In addition, property improvement loans are insured for 4}£% to 5H% discount per year (or an effective ti annu l rate of 6.8% to 10.6%). and with maturities of 6 months to 7 years. « Indefinite. 76 THE BUDGET FOR FISCAL YEAR 1971 In many cases, the rate charged is governed by statutory limits or formulas. Frequently, these are intended to assure loans at rates below those prevailing in the private market or below the cost to the Government, in order to provide special assistance to particular groups of borrowers as a method of accomplishing Federal program objectives. In some cases, the rates charged reflect mainly Government borrowing costs in earlier periods, rathei than current market yields of Government obligations. Interest rates charged borrowers on insured and guaranteed loans tend to correspond more closely to market rates of interest on comparable loans by private lenders—allowing for the reduction or removal of the normal private credit risk. Numerous changes in the statutory provisions governing interest rates have provided greater administrative flexibility to adjust rates to correspond with the changing conditions of the private credit market. In a few cases, interest rates paid by the borrowers on insured loans are set below the market rate and a secondary market is provided to assure the willingness of the private lender to originate the loans. The Federal Housing Administration for example, was authorized in the Housing Act of 1961 to insure certain types of loans to finance moderate-income housing at rates (currently 3%), well below those prevailing in the private market and GNMA has been purchasing all of such mortgages. This program is now being gradually replaced by direct interest subsidies on privately financed loans. In other cases, the Federal agency pays part of the interest cost necessary to obtain private financing. For example, the Farmers Home Administration, in selling direct loans (on an insured basis) to private investors undertakes to make supplementary interest payments sufficient to assure market yields to the purchasers. In several of its programs, the Department of Housing and Urban Development makes contracts to pay part of the interest, and in certain programs both principal and interest, in order to reduce or eliminate the financing costs on private borrowing used to acquire housing for lowor moderate-income families, as well as to finance college housing.1 Unlike most other programs, Government outlays on credit programs are largely or wholly repayable with interest, so that the ultimate net cost is normally low. Some programs are fully selfsupporting; in others, income from interest payments or insurance and guarantee fees covers most of the current expenses, and sometimes provides reserves for future losses. But a substantial number of credit programs contain an element of subsidy; e.g., by payment of interest subsidies on guaranteed loans, or by lending at more favorable interest rates than prevail in the private market. Three major groups of self-supporting credit agencies in 1969, were converted to private ownership. Other major direct loan programs are being shifted to insured loans, with explicit provision for interest supplements to be separately provided in order to reduce the costs to low or moderate income borrowers while maintaining gross interest rates high enough to be attractive to private lenders. The net effect of several of these programs will be to transfer most or all of the 1 For more detailed discussion, see Special Analysis N "Federal Housing Activities," pp.214-15. 77 SPECIAL ANALYSES interest subsidies on future loans to the expenditure account. This approach permits a considerable expansion in insured loans, both under existing and proposed legislation, while at the same time adding to the current costs the necessary amounts of interest subsidies. Maturities, both on direct and on insured or guaranteed loans, often are substantially more liberal than on private loans of similar types. Private lenders are often limited by law or supervisory policy to shorter maturities. When a Federal agency insures or guarantees the loans, however, these limitations customarily do not apply. Lenders can safely extend their loan maturities and borrowers can take advantage of lower periodic installments to acquire assets yielding income or tangible benefits over a long period of years. GOVERNMENT-SPONSORED CREDIT PROGRAMS Six major types of Government-sponsored privately owned institutions administer credit programs. The programs of these institutions are neither included in the budget totals, nor subject to budgetary control. Detailed schedules and explanatory statements of five of .these groups and of the Board of Governors of the Federal Reserve System are printed as annexed budgets in Part III of the Appendix. The operations of the Federal Reserve banks have no direct effect on budget totals, but payments of excess Federal Reserve earnings are regularly made to the Treasury and become budget receipts. The five Government-sponsored credit programs—excluding the Federal Reserve banks (for which no forecasts are available)— anticipate continued expansion in their lending activity in both 1970 and 1971. Their total loan portfolios are expected to rise by a record Table E-5. NET CHANGES IN OUTSTANDING LOANS FOR MAJOR GOVERNMENT-SPONSORED CREDIT PROGRAMS (in millions of dollars) Increases Agency Total 1970 estimate 1971 estimate 1,442 5,648 4,600 18,538 *17 1701 583 97 436 577 103 479 582 1,795 5,270 7,716 1,524 4,487 2,400 13.300 4,267 11,245 8,164 46,619 1,469 (3) 1969 actual * Housing and Urban Development: Federal National Mortgage Association 2 Farm Credit Administration: Banks for cooperatives Federal intermediate credit banks _ Federal land banks Federal Home Loan Bank Board: Federal home loan banks _ Federal Reserve, Board of Governors: Federal Reserve banks. » 1 ___: Outstanding end of 1971 estimate (3) (3) 1 1969 data exclude following net changes prior to conversion to private ownership: Federal National Mortgage Association, $223 million; banks for cooperatives, $123 million; and Federal intermediate credit banks, —$278 million. 9 Data for Federal National Mortgage Association represent gross unpaid principal amounts. 3 Estimates not available. 78 THE BUDGET FOR FISCAL YEAR 1971 amount of $11.2 billion in 1970 and by another $8.2 billion in 1971 to $46.6 billion on June 30, 1971. Most of the 2-year increase represents purchases of insured and guaranteed housing mortgages by the Federal National Mortgage Association and advances by the Federal home loan banks to member institutions engaged almost entirely in home mortgage lending. Hence, these programs, like the Governmentguaranteed and insured loans previously discussed, are currently being devoted largely to supporting the housing market. SUMMARY OF FEDERAL AND FEDERALLY ASSISTED CREDIT Changes in the outstanding volume of credit either directly provided or given major assistance by the types of programs discussed in this analysis are summarized in table E-6. The coverage includes direct Government loans, Government-guaranteed and insured loans, and loans of Government-sponsored enterprises (excluding the Federal Reserve banks). Adjustments are made to exclude double counting, e.g., cases where loans by these agencies are also guaranteed or insured. During the fiscal year 1969, the aggregate amount of such credit outstanding increased by $15.1 billion. On the basis of present estimates, further increases will occur of $19.1 billion in 1970 and $22.3 billion in 1971, bringing the total outstanding credit and credit assistance to $220.4 billion on June 30, 1971. In addition to the rapid rise in total volume of Federal and federally assisted credit, sharp shifts in the year-to-year pattern will occur. During the current 1970 fiscal year and to a lesser extent in 1971, Table E-6. NET CHANGES IN O U T S T A N D I N G FEDERAL AND FEDERALLY ASSISTED CREDIT (in millions of dollars) Increasei or decrease n credit Type of credit assistance Direct Government loans: Expenditure account Loan account 1969 actual 1970 estimate 1971 estimate Outstanding end of 1971 estimate 1,901 M.476 2,466 2,900 925 683 20,751 33,078 2 3,377 5,365 1,608 53,829 Guaranteed and insured loans Less net increase in holdings by: Federal National Mortgage Association Government National Mortgage Association __ Less guarantees of securities backed by insured mortgages 9,694 9.022 18,331 145,056 1,665 560 5,648 404 4,600 348 18,538 5,069 500 1,000 1,500 Net, guaranteed and insured loans 7,469 2,470 12,523 119,941 M,267 11,245 8,164 46,619 15,113 19,080 22,295 220,389 Net, direct loans Government-sponsored agencies, 3 loans Total 1 Excludes change of $11,824 million in amounts of outstanding direct loans resulting from conversion to private ownership. 3 Direct loan data for 1969 include and other data exclude following loans made or purchased prior to conversion to private ownership: Federal National Mortgage Association. $177 million (acquisition cost); banks for cooperatives, $123 million; and Federal intermediate credit banks, —$278 million. 1 Excludes Federal Reserve banks. SPECIAL ANALYSES 79 the five Government-sponsored credit agencies—especially the Federal National Mortgage Association and the Federal home loan banks— will provide an increased share of the total expansion. By contrast, because of the tight credit market, the rise in the outstanding volume of guaranteed and insured loans will be about the same as in 1969, and even this rise will only be possible because of the sizable purchases of such loans by FNMA. In 1971, improvement in private financial markets is expected to accommodate a significant increase in the volume of guaranteed and insured housing loans, with somewhat less dependence upon FNMA purchases. The same improvement should also reduce needs for advances by the home loan banks. SUMMARY OF LEGISLATION AUTHORIZING NEW FEDERAL CREDIT PROGRAMS AND BROADENED The following summary lists all legislation authorizing new Federal credit programs or revising existing programs in major respects enacted during the last session of Congress. It excludes simple extensions in expiring laws and increases in funds for continuing programs. I. Agency for International Development A. Foreign Assistance Act of 1969—Public Law 91-175 (1) Establishes Overseas Private Investment Corporation authorized to make direct loans, guarantees, and investments and otherwise stimulate U.S. private investment abroad; (2) broadens Latin American housing guarantee program; and (3) authorizes pilot program of community development loan guarantees for Latin America. II. Department of Health, Education, and Welfare A. Emergency Insured Student Loan Act of 1969—Public Law 91-95 Authorizes payment of special incentive allowances up to 3 % of the principal amount of future insured student loans to assure eligible holders equitable returns. III. Departments of Housing and Urban Development and Agriculture A. Housing and Urban Development Act of 1969—Public Law 91-152 (1) Lowers down payments on sales housing loans insured by the Federal Housing Administration and increases maximum mortgage amounts for these and other insured loans; (2) authorizes FHA loan insurance for mobile homes; (3) liberalizes terms on which the Government National Mortgage Association can purchase and sell insured mortgages; (4) authorizes supplemental grants to encourage urban renewal loans from private sources; and (5) authorizes the Secretary of Agriculture to lend funds to public or private nonprofit organizations to provide sites for rural housing for low- and moderate-income families. 80 THE BUDGET FOR FISCAL YEAR 1971 IV. Federal Home Loan Bank Board and Small Business Administration A. Credit program amendments and interest rate control extension—Public Law 91-151 (1) Requires Secretary of the Treasury to lend to the Federal home loan banks when necessary to supply reasonable amounts of funds to the mortgage market; and (2) directs the Small Business Administration to increase loans to small business investment companies by $70 million. V. Small Business Administration and Department of Agriculture A. Disaster Relief Act of 1969—Public Law 91-79 Authorizes partial cancellation of principal and/or waiver of interest due, and liberalizes other standards on certain disaster loans made by the Small Business Administration and on similar emergency loans made by the Secretary of Agriculture. SPECIAL ANALYSIS F PRINCIPAL FEDERAL STATISTICAL PROGRAMS Principal statistical programs of the Federal Government in the 1971 budget, summarized in this analysis, seek to provide accurate, comprehensive, and timely information on the functioning of the economy and on the welfare of the people, for both Government and general public use. During the recent past, deficiencies in official statistics have handicapped the formulation of social and economic policy. A substantial improvement in the promptness and accuracy of current economic indicators is required to discern and interpret economic trends. Existing measures of health, public safety, poverty, and education have proved to be inadequate to meet pressing needs for information for actions to improve social conditions. These statistical gaps must befilled.To carry out the New Federalism and provide adequate information required by local authorities in dealing with social and economic problems, more statistical detail for States, metropolitan areas, and large central cities is required. The changes in principal Federal statistical programs for 1971 emphasize these needs. A general grouping of the statistical activities of the various agencies is reflected in the amounts shown for current statistical programs (see table F-l). Recommendations for 1971 for current statistics total $161.2 million compared to $141.2 million in the previous year, an increase of $20 million. In addition to these continuing activities, the Federal Government conducts a number of periodic programs, such as the Census of Population and Housing every 10 years, the Economic Censuses every 5 years, and the periodic revision of the Consumer Price Index. Amounts required for these programs fluctuate widely from year to year depending upon the nature and periodicity of the activities. Recommendations for the periodic programs for 1971 aggregate $56.7 million, most of which represents costs of processing and publishing the 19th decennial census. To indicate the interrelationships of the statistical programs carried out by different agencies and to aid in evaluating the Government's overall statistical system, the significant components of current Federal statistical activity are brought together and classified by broad subject areas. These areas and the amounts involved for current programs are summarized in table F-l. Information by agencies, for both current and periodic programs, is shown in table F-2. When adjustments are made because of reorganization of statistical units or activities, or new fields are covered, figures are carried back to both the current and previous years so that all 3 years covered by the special analysis are on a comparable basis. In some cases, these programs represent the entire output of agencies whose whole function is to develop general-purpose statistical information. In other instances, an agency's general-purpose statistical output is a byproduct of its principal activities. Consequently, the 81 390-700 O—70 6 82 THE BUDGET FOR FISCAL YEAR 1971 current statistical programs covered in this analysis include the entire program of some agencies and only a small part of the programs of others. A brief description of the major program changes is shown below by broad subject areas. Adjustments made for additional amounts required for strengthening existing programs, increased pay costs, and for savings resulting from increased productivity are not itemized in descriptive statements but are reflected in the totals. Table F-1. OBLIGATIONS FOR PRINCIPAL CURRENT STATISTICAL PROGRAMS, BY BROAD SUBJECT AREAS (in millions of dollars) Program Labor statistics (Departments of Agriculture, Interior, and Labor; National Science Foundation)__ Demographic and social statistics (Departments of Agriculture, Commerce, Health, Education, and Welfare, and Justice; National Science Foundation; Office of Economic Opportunity)... Prices and price indexes (Departments of Agriculture, Commerce, and Labor) Production and distribution statistics (Departments of Agriculture, Commerce, Defense, Interior, and Transportation; Civil Aeronautics Board; Interstate Commerce Commission) Construction and housing statistics (Departments of Commerce and Housing and Urban Development; Federal Home Loan Bank Board) National income and business financial accounts (Departments of Agriculture, Commerce, and Treasury; Federal Trade Commission; Securities and Exchange Commission) Total, principal current programs 1969 actual 1970 estimate 1971 estimate 27.8 29.7 32.4 44.2 52.2 63.3 7.0 7.7 8.9 31.5 34.3 36.9 4.1 4.6 5.6 12.1 12.7 14.1 126.7 141.2 161.2 LABOR STATISTICS Of the $2.7 million increase requested for labor statistics, about $1 million represents increased costs of existing programs at both the Federal level and in cooperating States. Much of the balance would be used to increase substantially the amount of small area information available on employment and wages and to develop more detailed projections of the labor supply. Monthly data on employment, hours, and earnings would be provided for 37 additional standard metropolitan statistical areas (thus including every SMSA). Expanded industry coverage would permit the publication of more information on trade and service industries at the State level. Additional work on projections of labor supply would permit the publication of projections by age, sex, and color for the 100 largest standard metropolitan statistical areas. Greater occupational and industrial detail in manpower requirements projections would supply much needed additional estimates at the national level and, in combination with increased capabilities for furnishing technical guidance to State and local governments, would provide a basis for improving manpower projections made by State and local agencies. About $400 thousand is included in the budget of the Bureau of Labor Statistics for these purposes. SPECIAL ANALYSES 83 The community wage information program would be strengthened by expanding industry coverage in the present 90 area wage survey program to include all nonagricultural industries; by publishing wage data for 10-15 large central cities instead of two; and by extending the program to enough smaller communities to permit publication of national and regional estimates. An additional $300 thousand is requested in the budget for the Bureau of Labor Statistics for this purpose. BLS is being called on to develop information on occupational earnings in State and local governments and $160 thousand is requested for this work. A special post-Censal survey to provide more detailed information on education, training, and career patterns of scientific and technical personnel is planned; $300 thousand is included in the budget request for the National Science Foundation to carry out this survey. An expansion of the health and safety statistical activities of the Bureau of Mines will be necessary in order to implement the recently enacted Federal Coal Mine and Health Safety Act of 1969. An additional $600 thousand is included for the Bureau of Mines to accomplish this. DEMOGRAPHIC AND SOCIAL STATISTICS An increase of $11.1 million is requested for 1971 to expand and improve the Government's demographic and social statistics. Population statistics.—Of the program changes proposed for 1971, the laigest and most important aie concerned with maintaining and improving the accuracy and timeliness of current population statistics in the 1970's. Tne address register and maps used to conduct the 1970 Census are to be up-dated on the basis of information being developed in the taking of the census. A 3-year program to modernize the sample used in the Current Population Survey on the basis of 1970 Census information is to be inaugurated. The FederalState cooperative program for producing annual estimates of population for small areas (a progiam in which some 40 States are participating) is to be stiengthened. It is also proposed to expand the information made available through the Current Population Survey by developing annual socioeconomic data on ethnic minorities, especially on persons of Spanish heritage (Spanish-Americans, Mexican-Americans, Puerto Ricans, etc., as a group). The 1971 budget for the Bureau of the Census includes $1.6 million for these programs. Health and vital statistics.—All of the program increases are for work to be performed by the National Center for Health Statistics. They include the initial funding of family growth studies for use in the design and management of family planning and infant and maternal health programs ($166 thousand); making the family planning services reporting system fully operational ($150 thousand); design and testing of the fourth cycle of the Health Examination Survey, which will include the National Nutrition Surveillance program ($119 thousand); and a small amount ($65 thousand) to provide consultation and technical assistance to local areas wishing to conduct health surveys in their own jurisdictions. 84 THE BUDGET FOR FISCAL YEAR 1971 Educational statistics.—Changes in the 1971 program include: (1) the development of information from high school and post-high school students to improve higher educational planning, to provide a better basis for the analysis of problems of dropouts, and to gain new insights into the transition from secondary education into work status or into further education; (2) the development of information to better judge the impact of Federal assistance to improve programs of science, mathematics, and foreign language, and school library facilities; (3) the measurement of the extent to which occupational training is taking place in nonpublic schools; (4) studies of the characteristics of educational broadcasting and the development of measures of the effects of radio and TV on the content and process of education; and (5) exploratory efforts to develop quantitative measures of educational achievement. The costs of these new programs ($2.3 million) are partially offset by adjustments in existing programs. Social Security statistics.—Program increases for Social Security statistics in fiscal year 1971 are concentrated in the continuing program to examine the changes over time in income and living patterns of retirees ($150 thousand); in an expansion of the program to provide national data to analyze the retirement process ($50 thousand); in a followup study of the disabled population after the 1970 Census ($500 thousand); in continuing studies of the costs and coverage of prescription drugs in the medicare program ($200 thousand); and in a number of other studies of the medicare program ($225 thousand). Increases in processing costs will add another $500 thousand to the costs of Social Security statistics in fiscal year 1971. These increases are partly offset by the completion or phasing out of other statistical research activities. Economic opportunity.—It is proposed to increase substantially the research and statistical activities of the Office of Economic Opportunity ($2 million) in order to provide expanded evaluation of Federal programs to aid the poor. The work of the Economic Research Service, Department of Agriculture, aimed at developing indicators of rural economic and social well-being will continue at an expanded level. The budget provides an additional $262 thousand for this activity. Crime statistics.—The principal changes proposed for the Federal Government's crime statistics program in fiscal year 1971 are associated with the activities of the National Criminal Justice Information and Statistics Service in the Law Enforcement Assistance Administration. It is proposed that LEAA proceed with the development of a directory of all public criminal justice agencies in the United States, that it conduct a national census of jail and juvenile facilities, and, by contract with the Census Bureau, that it plan, test, and conduct a survey to develop victimization experiences. Additional funds included in the budget for LEAA in fiscal year 1971 ($3 million) will also provide funds to continue Project SEARCH (System for Electronic Analysis and Retrieval of Criminal Statistics). SPECIAL ANALYSES 85 PRICES AND PRICE INDEXES An increase of $1.2 million is requested for 1971 to improve price statistics. Most of the proposed changes seek to improve the accuracy of these data. Work now in progress to improve the Wholesale Price Index would be extended to develop (1) data on prices of industrial products which are based on actual transactions rather than list prices, and (2) a general price index as a tool for analyzing the relationship between prices and price changes in different parts of the economy ($195 thousand). In the Bureau of the Census, current work on the development of construction price indexes would be expanded. Work on price indexes for nonresidential construction would begin, starting with school and hospital construction. Quarterly national and annual regional indexes for new single family homes would also be developed ($233 thousand). The budget for the Statistical Reporting Service, Department of Agriculture, includes funds to update commodity coverage and the weights used in computing the Indexes of Prices Paid by Farmers ($80 thousand). In addition to these program changes to improve the accuracy of price data, a proposal to expand the amount of retail price information available for local areas is included in the 1971 program of the Bureau of Labor Statistics; $250 thousand is requested to provide retail price information for 16 large cities and to develop additional intracitv data in order to obtain information on prices paid by consumers with different levels of income. PRODUCTION AND DISTRIBUTION STATISTICS An increase of $2.6 million is requested for 1971 to expand statistics on production and distribution of goods and services. The Bureau of the Census will develop and test better estimating techniques for compiling retail trade statistics and procedures for speeding up reports from retail stores ($300 thousand). Coverage of the current series on services will be expanded ($115 thousand) to include nonprofit organizations, engineering and architectural services, and accounting, auditing and bookkeeping services. Census will start compiling an annual series on industrial mergers, acquisitions, and disposals ($54 thousand). Funds proposed for the Economic Research Service, Department of Agriculture, would permit testing the feasibility of using remote sensing techniques in land use inventorying ($52 thousand) and provide statistical support to a study of the impact of world agricultural development and adjustments on U.S. foreign trade ($200 thousand). Additional funds ($1.1 million) are requested for the Statistical Reporting Service, Department of Agriculture, to continue work on a multiframe estimating procedure to improve livestock estimates. Minor increases totaling $95 thousand are requested for programs designed (1) to improve the accuracy of quarterly farm grain stocks estimates, (2) to investigate possible uses of remote sensing for measuring acreages in crops, and (3) to explore other statistical techniques for improving crop and livestock estimates. The Department of Transportation will launch a long-range program to expand transportation statistics, concentrating on the highest 86 THE BUDGET FOR FISCAL YEAR 1971 priority needs for information set forth in the report of the Secretary of Transportation to the House Committee on Appropriations in May 1969 ($700 thousand). CONSTRUCTION AND HOUSING STATISTICS An increase of $1 million is requested to improve and extend construction and housing statistics. The long-range program to improve the reliability of current statistics on construction activity will focus on (1) reducing the sampling error in present monthly estimates of the value of nonresidential construction put in place, (2) providing data on the construction of office buildings and stores, and (3) expanding the collection of data in the form of progress reports on hotels, motels, and dormitories. An additional $224 thousand is included in the budget for the Bureau of the Census for these purposes. The Bureau of the Census will inaugurate a program whose objective is better to define problem housing areas. It will develop and test (1) new and improved inquiries and indicators to identify poor housing, and (2) statistical indicators—physical, social, and economic—of the effects of neighborhood deterioration ($245 thousand). The 1971 budget proposal for the Department of Housing and Urban Development includes two new programs that will improve information on the available housing supply. One program will develop measures of residential demolition; the other (by contract with the Bureau of the Census) will extend the quarterly national survey of residential vacancies to cover a small number of selected local areas ($200 thousand). The 1971 statistical program of the Federal Home Loan Bank Board covers the purchase of computer time and program services in connection with the development of a management information system and the provision of a number of additional statistical services ($300 thousand). NATIONAL INCOME AND BUSINESS FINANCIAL ACCOUNTS An increase of $1.4 million is requested for 1971 to improve data on national income and business financial accounts. Economic accounts.—The budget estimates for the Office of Business Economics include amounts for monthly estimates of GNP ($220 thousand), preparing input-output tables on an annual basis instead of every 5 years ($110 thousand), developing new measures of the impact of Federal activity ($150 thousand), and preparing quarterly estimates of nonfarm investment ($110 thousand). An additional $160,000 included in the budget request for the Economic Research Service will be used to improve sources of data and methods of estimating farm income. Government statistics.—A major effort to improve current information relating to the finances and employment of local governments is proposed in the 1971 program for the Bureau of the Census. An amount of $320 thousand is included to develop annual data for local governments in 72 standard metropolitan statistical areas and in 47 large counties. The present program is limited to local governments SPECIAL ANALYSES 87 in 37 SMSA's. Figures will be developed for each central city and each county in the 72 largest SMSA's and for selected major local governments in large counties outside SMSA's. The reports will include a number of analytic measures to make the data more useful. The Internal Revenue Service statistical program for 1971 provides for advanced work on the Taxpayer Compliance Measurement Program, and a special analysis of schedule H of the corporate tax return (Reconciliation of Book Profits to Earnings and Profits). An increase of $500 thousand is proposed for these purposes. PERIODIC PROGRAMS 19th Decennial Census.—The decrease in the budget request for fiscal year 1971 stems from substantial completion of data collection activities. In fiscal year 1971, there will be data collection for the components of inventory change and residential financing surveys of the Census of Housing. The only other data collection activity remaining to be done in fiscal year 1971 is the Census Employment Survey in poverty sections of selected urban and rural areas. Most of the 1971 request will be used to pay for the processing and publication of 1970 census materials. 1972 economic censuses.—The budget requests for the Bureau of the Census contain $1.4 million, the initial appropriation for the 1972 Censuses of Business, Manufactures, Mining, and Transportation. The funds will be used to develop the specifications and basic operating plans for the collection, processing, and publication of 1972 census materials. 1972 Census of Governments.—The requested $120 thousand will be used to develop operational plans and procedures for taking the census. Census oj Agriculture.—The increase of $7.4 million covers the completion of data collection activities, the processing of returns, some of which has been deferred from fiscal year 1970 because of reduced funds, and the commencement of publication of census materials. Survey of population change.—An amount of $200 thousand is recommended to prepare for a large-scale sample survey of changes in the social and economic characteristics of the population planned for fiscal year 1973. Large-scale data processing equipment purchase.—The budget request would permit the Bureau of the Census to buy (1) two computers now leased by the Bureau under a lease-purchase agreement, (2) additional computer core memory, (3) a data-transmission system between Jeffersonville, Ind., and Washington, as well as to replace high-speed printers, remote terminals, and related equipment. Revision of the Consumer Price Index.—The 1971 budget request for the Bureau of Labor Statistics includes $1.5 million for the second year of a comprehensive revision of the Consumer Price Index. This revision is undertaken every 10 years. T H E BUDGET FOR FISCAL YEAR 1971 Table F-2. OBLIGATIONS FOR PRINCIPAL STATISTICAL PROGRAMS, BY AGENCY (in millions of dollars) Agency 1969 actual 1970 stimate 1971 CURRENT PROGRAMS Department of Agriculture: Economic Research Service: Statistical activities Statistical Reporting Service Department of Commerce: Bureau of the Census Office of Business Economics Department of Defense: Corps of Engineers: Domestic shipping statistics Department of Health, Education, and Welfare: National Center for Educational Statistics National Center for Health Statistics Social Security Administration: Statistical and research activities Social and Rehabilitation Service: Statistical and research activities Department of Housing and Urban Development: Statistical activities Department of the Interior: Bureau of Mines: Mineral and safety statistics Department of Justice: Crime statistics Department of Labor: Bureau of Labor Statistics Manpower Administration: U.S. Training and Employment Service: Statistical activities Office of Manpower Research: Statistical activities Department of Transportation: National transportation statis- tics- Department of the Treasury: Internal Revenue Service: Statistical reporting Civil Aeronautics Board: Statistical and research activities Federal Home Loan Bank Board: Statistical activities Federal Trade Commission: Financial statistics Interstate Commerce Commission: Reports and statistics National Science Foundation: Statistics and special analyses Office of Economic Opportunity: Statistical and research activities. Securities and Exchange Commission: Operational and business statistics and institutional investors study. __ ___ Total, current programs. __ 3.5 14.7 3.6 16.5 4.3 17.8 18.1 3.1 19.6 3.4 22.7 4.1 1.1 1.1 1.2 3.2 8.1 5.0 9.2 7.1 9.9 18.5 20.0 21.5 .9 1.5 1.5 .7 .7 .9 2.6 1.6 3.1 2.9 3.7 5.7 22.0 23.5 26.1 3.4 3.7 3.7 3.7 3.7 3.7 .3 .5 1.2 6.9 .8 .9 .4 .8 4. 6.6 6.6 .9 1.1 .4 .8 4.4 8.0 7.1 1.0 1.4 .5 .7 4.8 10.0 1.0 .6 126.9 141.2 161.2 17.9 145.3 .2 50.3 .3 1.4 .2 3.0 7.1 4.6 .1 PERIODIC PROGRAMS Department of Commerce: Bureau of the Census: 19th decennial census 1972 census of governments 1972 economic censuses Survey of Population Change Modernization of computer equipment 1967 economic censuses . 1967 census of governments Department of Labor: Bureau of Labor Statistics: Revision of Consumer Price Index Total, periodic programs.__ Total, principal statistical programs. .6 1.5 SPECIAL ANALYSIS G BALANCES OF BUDGET AUTHORITY This analysis presents information on balances of budget authority carried forward at the end of each fiscal year. These balances may be obligated or unobligated; the latter occur only when the source of authority permits their use in subsequent years. Such balances of budget authority are a natural outgrowth of the Federal budget system, in which outlays can only occur subsequent to the enactment of appropriations or other forms of budget authority. In the case of most Government accounts, the time lag between appropriations of budget authority, obligations of funds, and related outlays is relatively short, and appropriations not obligated by the end of the fiscal year expire. However, in other cases, such as major procurement and construction programs, obligations and outlays may occur over a period of years after the budget authority is granted, and balances are carried forward until the authority is obligated and spent. In still others, authority is provided for standby emergency purposes (such as backup for insurance of bank deposits); if such authority is not needed or used, it is carried forward as part of the balance year after year. Amounts that have been obligated are carried forward until the subsequent payment of such obligations. Such amounts are known as obligated balances. The sum of the unobligated and obligated balances constitutes the unexpended balances. SUMMARY OF BALANCES BY FUND GROUPS Table G-l provides a breakdown of unexpended balances of budget authority under Federal funds and trust funds, and shows the unobligated and obligated amounts in each of the fund groups. Federal funds are those collected and used by the Federal Government, as owner. Of the estimated $133.6 billion of Federal fund unexpended balances at the end of 1971, the major portion—$82.5 billion (62%) will be obligated. Correspondingly, unobligated Federal fund balances are estimated at $51.1 billion (38%) of the Federal fund unexpended balances. Trust funds are those received and administered in a fiduciary or trustee capacity by the Federal Government for specified purposes, such as social security programs. Of the $116.3 billion trust fund unexpended balances at the end of 1971, unobligated balances are estimated to be $103.7 billion (89%). Trust fund obligated balances are estimated to be only $12.6 billion (11%) of trust fund unexpended balances. 89 90 THE BUDGET FOR FISCAL YEAR 1971 Table G-1. SUMMARY OF BALANCES (in million* of dollars) Bala nces end-of-:rear Federal funds: Unobligated balances Obligated balances ___ Total Federal fund unexpended balances Trust funds: Unobligated balances Obligated balances _ _ Total trust fund unexpended balances Total unexpended balances: Federal and trust funds _ 1969 1970 1971 54,548 72,688 49,099 77,022 51,065 82,541 127,236 12 ,121 133,606 87,057 11,279- 96,008 11,527 103,748 12,568 98,337 107,535 116,316 225,572 233,656 249,922 Note—Excludes balances rescinded or lapsing at the end of the year. FEDERAL FUND UNOBLIGATED BALANCES There are a variety of reasons for the unobligated balances in Federal funds. These are reflected in the categories used in table G-2. These categories are not mutually exclusive, since an individual item might be placed in more than one category, but they do serve to illustrate the basic characteristics of the balances. For purposes of this analysis, the categories cover only those accounts with balances of $20 million or more. Accounts with unobligated balances of less than $20 million are shown in the aggregate at the end of the table. Guarantee and insurance programs.—The Federal Government provides guarantees and insurance in certain areas, notably in housing and banking activities. In these kinds of programs, appropriations and other budget authority are provided for contingency backup, reserves, and debt redemption. To the extent such authority is not used, the amounts are carried forward as unobligated balances. Of the $51.1 billion Federal fund balances estimated to remain unobligated at the end of 1971, $25.9 billion (51%) fall into this category. The major portion of this amount ($19.7 billion) is basically standby and backup authority that, it is hoped, will not be used in the foreseeable future—for example: • $5,715 million is available for investment in the International Bank for Reconstruction and Development and $1,124 million for other international financial institutions, if these institutions make a "call" upon member nations for more paid-in capital; • $4,750 million is available for the Federal home loan banks and for the Federal Savings and Loan Insurance Corporation; • $3,000 million is available for the Federal Deposit Insurance Corporation; and • $2,250 million is available for loans to the Federal National Mortgage Association. 91 SPECIAL ANALYSES Table G-2. ANALYSIS OF FEDERAL FUND UNOBLIGATED BALANCES (in millions of dollars) Unobligated balances end-of-year Category and agency 1969 actual 1970 1971 Guarantee and insurance programs: 1 Standby and backup authority: International financial institutions: International Bank for Reconstruction and Development.. Other Federal Home Loan Bank Board: Investment in Federal Home Loan Banks Federal Savings and Loan Insurance Corporation Federal Deposit Insurance Corporation Department of Housing and Urban Development: Loans to Federal National Mortgage Association Low rent public housing and urban renewal. Flood and civil disorder insurance. Federal Housing Administration fund Veterans Administration: Loan guaranty fund. Other Total standby and backup authority _ Reserves for losses and debt redemption: Federal Home Loan Bank Board: Federal Savings and Loan Insurance Corporation Department of Housing and Urban Development: Federal Housing Administration Fund Government National Mortgage Association: Participation sales fund Veterans Administration: Veterans insurance funds Department of Agriculture: Rural housing, agriculture credit, and Federal crop insurance Economic Assistance: Foreign investment guaranty fund and Overseas Private Investment Corporation Other Total reserves for losses and debt redemption. Total guarantee and insurance programs 5,715 918 5,715 1,124 5,715 1,124 1,000 750 3,000 4,000 750 3,000 4,000 750 3,000 2,250 1,597 538 278 554 260 2,250 1,373 553 287 417 '260 2,250 1,176 552 213 618 260 16,860 19,729 19,658 2,232 2,457 2,589 1,042 1,235 1,477 855 351 564 410 698 468 463 112 787 115 90 147 33 177 35 5,148 4,958 6,231 22,008 24,687 25,889 2,224 2,836 2,557 2,952 726 2,736 591 2,601 589 648 494 397 341 345 348 363 604 2,569 418 350 283 1,174 375 400 227 ""262 10,845 9,184 7.381 1 Loan programs: Department of Housing and Urban Development: Government National Mortgage Association: Special assistance functions Loans for college housing, public facilities, and housing for the elderly or handicapped > Veterans Administration: Direct loan revolving fund Department of Agriculture: Farmers Home and Rural Electrification loans Department of Labor: Advances to Employment Security Administration Economic Assistance: Alliance for progress and other development loan programs Small Business Administration Export-Import Bank Other Total loan programs. See footnotes at end of table. 92 THE BUDGET FOR FISCAL YEAR 197,1 Table G-2 ANALYSIS OF FEDERAL FUND UNOBLIGATED BALANCES (in millions of dollars)—Continued Unobligated balances end-of-year Category and agency 1969 actual 1971 estimate 1 Procurement programs:l Department of Defense—Military _ Department of Agriculture: Removal of surplus agricultural commodities.__ , __ _ _ _ _ Other Total procurement programs 1970 estimate . 11,007 6,760 5,457 300 187 300 13 300 344 11,494 7.073 6,101 65 150 350 161 3,350 96 157 101 1,599 310 1,359 153 152 1,461 356 895 2,930 50 1,106 324 351 3,741 3,528 8,207 949 517 779 740 1,466 779 740 1,219 1,675 274 1,071 1,207 1,298 319 560 1,466 536 229 228 4,239 3,384 2,459 755 465 287 54,548 49,099 51,065 12 Construction programs: Department of the Interior: Construction grants for waste treatment__ Parkway, road, and other construction •__ Department of Transportation: Urban mass transportation program Grants-in-aid for airports, and public lands highways Department of Defense—Military Department of Agriculture: Forest roads and trails Other Total construction programs 1 Research and development programs: Department of Defense—Military _ _ Other Total research and development programs __ 1 Other balances: Department of Defense—MilitaryDepartment of Housing and Urban Development Department of Transportation Other agencies Total other balances Balances of less than $20 million Total Federal fund unobligated balances 1 1 Covers accounts with balances of $20 million or more. Excludes loans for construction. Most of the remaining balances in this category are in the Department of Housing and Urban Development, which has an estimated $1,941 million in balances to support various kinds of programs. Of this amount, $1,176 million is backup for guaranteed private loans in the low-rent public housing and urban renewal programs, and $552 million is available for prompt payment to insurance companies of reinsurance claims in flood and civil disorder damage cases. SPECIAL ANALYSES 93 The remaining unobligated balances in this category ($6.2 billion) are derived from fees, premiums, and other types of collections obtained from the protected groups themselves. Most of these balances are held as reserves for losses, and are akin to funds held in trust. Significant items in this group include $2,589 million in fees and premiums collected from insured savings and loan institutions, $1,477 million for Federal housing insurance, and $468 million held in reserves for Veterans Administration insurance programs. The Department of Housing and Urban Development also has $698 million for payment to holders of participation certificates as they mature, which is in the nature of debt redemption. Loan programs.—Another sizable category of unobligated balances results from the financing of loan programs. Approximately 14%—$7.4 billion—of unobligated Federal fund balances estimated to be carried over into 1972 is in loan programs. These programs generally are financed through revolving or business-type funds, which are established to carry on a cycle of operations, mainly with the public. Most of these funds are expected to be selfsustaining over a period of years. Their capital requirements are supplied through appropriations or other forms of budget authority. As they generate receipts from their own operations, the funds pay interest on their borrowings and repay unneeded capital. Balances relating to the revolving funds usually consist of amounts on deposit with the Treasury or of undrawn authorizations to borrow either from the Treasury or directly from the public. Approximately 70% of unobligated balances in this category ($5,158 million), is in the Department of Housing and Urban Development, largely for the special assistance functions of the Government National Mortgage Association ($2,557 million) and for loans for college housing, public facilities, and housing for the elderly or handicapped ($2,601 million). Many of the programs in the Department of Housing and Urban Development require budget authority on a long-leadtime basis in order to provide assurance to the potential borrower or contractor that adequate financing will be available when needed. The requirements for these programs are complex, and considerable time and money are required on the part of the applicant to develop a project to the stage where the Government can enter into a firm legal obligation. To deal with this problem, a reservation system has been worked out under which the Government—on its books—sets aside sufficient financing at the time it is convinced the applicant can develop a project that will meet requirements. These reservations are converted into legal obligations when an acceptable application is submitted and approved. The amounts so reserved are counted as unobligated until the final agreement or legally binding contract is actually consummated. 94 THE BUDGET FOR FISCAL YEAR 197il In the absence of this reservation system, many potential applicants would be unwilling to spend the time and money needed to develop applications, and projects needed to accomplish Federal objectives would not be started. On the other hand, if the Government negotiated with applicants in the absence of fund availability, the Congress and the executive branch could be faced with demands for additional appropriations from applicants who felt the Government had made a moral commitment to finance the project once it encouraged development of the application. The reservation system, therefore, protects applicants against wasted effort, and enables the Government to attain its objectives more effectively and to improve its control over the amount of outlays to which it is committed. The Veterans Administration also carries sizable, although considerably smaller, unobligated balances for housing loan programs, totaling $589 million at the end of 1971. The Export-Import Bank has had sizable unobligated balances in past years. As indicated by data for the 3-year period covered by this budget, these balances are being progressively utilized in the expanded lending program of the Bank. Major procurement programs.—Of the $51.1 billion Federal fund balances estimated to remain unobligated at the end of 1971, $6.1 billion (12%) is attributable to the Government's major procurement programs. Approximately $5,457 million (90%) of the balances available for procurement is for the acquisition by the Department of Defense of capital equipment, such as aircraft, missiles, ships, combat vehicles, and other weapons. These sizable balances are due to the relatively long lead time required for such procurement and the application of a full funding policy. Full funding has the effect of setting a limit on the size of the specific program or project. This approach discloses to Congress the estimated full cost involved before the work actually begins, and requires that the Congress approve the estimated full cost before the project is undertaken. Full funding also provides the executive branch with more flexibility in programing work if economic or other conditions change, and in making more efficient use of resources in the conduct of the work. Under the full funding concept, it should be recognized that funds may be "committed" to a given purpose, even though legally unobligated. For example, in the Department of Defense, funds are committed when the contracting organizations are directed to proceed with procurement—that is, before invitations to bid are issued. Thus, funds are clearly earmarked for specific projects when contractors are asked to bid. This avoids having bidders go to the expense of responding to an invitation to bid, only to find that no contract can be awarded due to unavailability of funds. The practice of so earmarking funds is an important aspect of the Department of Defense's system for program and financial controls, and provides assurance to the business community that contracts will be awarded when an acceptable bid is developed. SPECIAL ANALYSES 95 Within the 3 years covered by this budget, the balances for military procurement are reduced by approximately 50%—in part because of rescissions in 1971, but mainly because of the decrease in the overall procurement program of the Department of Defense. Major construction programs.—Major construction programs account for $8.2 billion (16%) of the $51.1 billion Federal fund balances estimated to remain unobligated at the end of 1971. Most of these balances are for the waste treatment construction grant program ($3,350 million, or 41%) of the Department of the Interior and for the urban mass transportation program ($2,930 million, or 36%) of the Department of Transportation. These are two major new initiatives of this administration. The balances are attributable primarily to proposed legislation that provides budget authority to be used over a 5-year period. Lesser balances ($1,106 million) are for military construction by the Department of Defense. The full-funding policy discussed above under procurement also applies to these major construction programs. However, there are a few that are funded on an incremental basis, principally for reclamation, rivers and harbors, and flood control projects. In these programs only small unobligated balances are sometimes carried forward. Unobligated balances of loans for construction are excluded here. Such balances are included under loan programs. Research and development programs.—Another category of unobligated balances relates to research and development programs. Approximately 2% of the unobligated Federal fund balances estimated at the end of 1971—$740 million—is for research and development. All of the unobligated balances in this category estimated at the end of 1971 are in the Department of Defense—principally for the development, testing, evaluation, and improvement of weapons systems and related equipment. The "Other" balances are held by the National Aeronautics and Space Administration, the Atomic Energy Commission, the Department of Transportation (for civil supersonic aircraft development), and the National Science Foundation. It is anticipated that these balances will be fully obligated in 1970 and 1971. Other balances.—Of the remaining $2.5 billion (5%) of Federal fund unobligated balances (in accounts with balances of $20 million or more) to be carried forward into 1972, $1,466 million is in the Department of Defense, mainly for industrial fund operations. These balances are characteristic of industrial fund activity—they are attributable to the time lag that occurs between receipt of a work order by the fund, and completion of the work required under the order. The Department of Housing and Urban Development will have unobligated balances of $536 million in this category at the end of 1971, representing primarily urban renewal grant authority that is reserved for obligation when acceptable applications are developed (as described above under loan programs). The remaining $457 million represents scattered balances among a number of programs such as State and community highway safety, buildings management, and outdoor recreation. 96 THE BUDGET FOR FISCAL YEAR 197,1 FEDERAL FUND OBLIGATED BALANCES Table G-3 presents the major Federal fund obligated balances. Such balances are composed of the unpaid portion of obligations incurred by the Government in the form of orders placed, contracts awarded, and services received. Of the $82.5 billion Federal fund obligated balances estimated at the end of 1971, $32.2 billion (39%) are attributable to the military programs of the Department of Defense and military assistance to our allies. The remaining obligated balances of $50.3 billion (61%) arc scattered among the various civilian agencies and programs. The major cause of obligated balances is the long lead time required in the procurement, construction, and research and development activities of the Federal agencies. There is also a considerable time lag involved in grants for capital outlays, where the State or local government must be assured of the availability of Federal funds before it lets a construction contract, but the related Federal payments are phased out over several years as work is performed. This applies to urban renewal in the Department of Housing and Urban Development; urban mass transportation and airport facilities in the Department of Transportation; hospital, health, and higher education in the Department of Health, Education, and Welfare; and similar construction grant programs. Loan programs also account for sizable obligated balances due to the lag between the signing of the loan contract that creates the obligation, and the payments over a period of time as cash is needed by the borrower. This applies to loans to foreign borrowers such as those made by the Export-Import Bank and the Agency for International Development, and to domestic loans for programs such as rural electrification in the Department of Agriculture. Table G-3. FEDERAL FUND OBLIGATED BALANCES (in millions of dollars) Obligated balances end-of-year Description 1969 actual Department of Defense—Military: Procurement Operation and maintenance Research and development Construction Military personnel Other Total Department of Defense—Military Military assistance _ 1970 estimate 1971 estimate 18,814 3,097 3,519 1,098 697 2,276 19,753 3,036 3,758 1,031 1,950 m 19,616 2,893 3,760 1,764 1,009 1,891 29,501 30,415 30,933 1,346 1,280 U9<T 97 SPECIAL ANALYSES Table G-3. FEDERAL FUND OBLIGATED BALANCES (in millions of dollars)—Con. Obligated balances end-of-year Description 1969 actual Civilian agencies: Funds appropriated to the President: Economic assistance International financial institutions Office of Economic Opportunity Other Department of Agriculture: Commodity Credit Corporation Rural Electrification Administration Other Department of Commerce (mostly economic development and maritime programs) __ Department of Defense—Civil Department of Health, Education, and Welfare: Office of Education (mainly grants to colleges, universities, local school districts, and other educational institutions) _ _ Health services and mental health (mostly community mental health and hospital construction) National Institutes of Health Social Rehabilitation Service (mainly grants to States) Other Department of Housing and Urban Development: Renewal and housing assistance (mainly urban renewal and low-rent public housing) Metropolitan development Model cities and governmental relations Mortgage credit (mostly Government National Mortgage Association—special assistance functions) Other . Department of the Interior (principally grants for waste treatment and public outdoor recreation) Department of Labor (manpower development and training).Post Office Department (contribution to the postal fund) Department of Transportation (mainly airport facilities and development; and urban mass transportation) Atomic Energy Commission (mostly research and development) National Aeronautics and Space Administration (mostly research and development) Veterans Administration (mainly veterans compensation and pensions) Export-Import Bank Other civilian agencies 1970 1971 3,211 1,585 1,075 614 2,923 1,834 1,182 838 3,052 2,254 1,007 664 4,702 1,159 1,004 3,719 1,117 1,054 3,889 1,095 1,184 296 1,223 264 1,357 388 3,203 2,729 2,474 1,451 1,538 1,791 116 1,487 1,559 2,093 165 1,457 1,589 2,429 312 4,791 712 243 5,296 775 514 6,074 792 654 1,725 19 2,445 40 2,113 75 1,117 471 803 1,610 735 961 2,241 1,184 1,247 1,043 1,199 1,381 1,268 1,428 1,380 1,405 1,564 1,514 809 2,818 1,734 817 3,562 2,128 896 5,052 2,878 Total civilian agencies. 41,887 45,261 50,328 Total Federal fund obligated balances.. 72,688 77,022 82,541 390-700 O—70 98 THE BUDGET FOR FISCAL YEAR 1 9 7 1 TRUST FUND BALANCES The balances of trust funds are shown in table G-4. The amounts include both unobligated and obligated balances of trust fund authorizations. The unobligated balances include both the open book balances and investments in U.S. securities. The investments in such securities are held until funds arc needed to meet statutory requirements in subsequent years. Table G-4. T R U S T FUND BALANCES (in millions of dollars) Balances end-of-year Description Unobligated Federal old-age and survivors insurance trust fund.. Federal disability insurance trust fund _ Federal hospital insurance trust fund Federal supplementary medical insurance trust fund Unemployment trust fund Railroad retirement accounts Civil service retirement and disability fund Federal employees health benefits funds Federal employees life insurance fund Highway trust fund l National service life insurance fund. U.S. Government life insurance fund Foreign military sales trust fund Federal Deposit Insurance Corporation funds Other trust funds Total trust funds. 1971 1970 1969 Obligated Unobligated Obligated Unobligated Obligated 26,145 1,974 29,956 2,385 32,520 2,491 3,459 201 4,756 254 6,363 276 1,957 18 2,210 11 3,077 16 372 12,526 4,502 6 38 131 50 13,059 4,572 17 38 147 224 13,189 4,649 26 38 20,230 204 21,674 234 23,081 105 26 103 13 107 4,264 5,915 654 7,102 332 5,783 6,040 801 6,691 340 6,519 6,102 822 2,415 23 227 786 2,315 21 207 749 2,135 955 7,286 356 22 282 3,870 475 290 53 4,181 523 311 57 4,522 511 329 62 87,057 11,279 96,008 11,527 103,748 12,568 150 267 12 revolving fund for all 3 years; and Forest highways and Public lands * Includes includes Right-of-way Kight highways for 1971. SPECIAL ANALYSIS H CIVILIAN EMPLOYMENT IN THE EXECUTIVE BRANCH In July 1969, statutory controls on the hiring of Federal civilian employees were replaced by more flexible administrative controls. Under these administrative controls, full-time permanent employment at the end of fiscal year 1970 will be 90,700 less than that planned by the outgoing administration in the original 1970 budget. It is planned that Government-wide full-time permanent employment will not increase in fiscal year 1971. Increases in 1971 to accommodate new programs and an expanding Federal workload for a growing population will be offset by decreases in employment in the Defense Department and by selective reductions in a number of agencies made possible by changing program emphases and improved efficiency and productivity. The estimates in this analysis for both full-time permanent and total employment reflect continued vigilance over employment levels and sustained efforts by agency managers to absorb workload increases through productivity improvements and modern management techniques. FULL-TIME PERMANENT CIVILIAN EMPLOYMENT In fiscal year 1969, reductions in Federal employment were required by section 201 of the Revenue and Expenditure Control Act of 1968. Because section 201 imposed a formula for the reduction of employment with little regard for the growing Federal workload, the administration sought, and the Congress agreed, to rescind that section of the act effective in July 1969. The formula that had been imposed by the law resulted in a reduction of 57,177 in the full-time permanent Federal civilian employment covered by the act. This was partially offset by increases in agencies which Congress had exempted from the law. There was a net reduction in full-time permanent employment of 36,350. Full-time permanent employment on June 30, 1969, was 2,633,762. The level of full-time permanent civilian employment in the executive branch anticipated for June 30, 1970, is 2,602,800, or 42,900 fewer than the 2,645,700 announced on April 15, 1969, and 90,700 fewer than estimated in January 1969. Reductions have been applied selectively to various agencies taking account of workload, productivity, and other related factors. The bulk of the decrease falls in the Department of Defense. Other agencies with major overseas employment will bea,r a share of the cutback. The overall reduction will be attained even with the provision for a substantially increased personnel contingency allowance, which is designed to give the President greater flexibility in reallocating personnel resources than was possible under the employment limitations of the Revenue and Expenditure Control Act of 1968. 99 100 THE BUDGET FOR FISCAL YEAR 1971 Full-time permanent civilian employment is estimated to reach 2,597,200 by the end of fiscal year 1971. About 43% of these employees will work in the Department of Defense, another 23% in the Post Office, and about 6% in the Veterans Administration. These three agencies account for about 72% of all permanent full-time employment in the executive branch. Table H-l displays the estimated changes in yearend civilian fulltime permanent employment between fiscal years 1970 and 1971. The total anticipated increase in the civilian agencies of about 45,200 and in the contingency allowance of 5,000 is offset by a reduction of approximately 55,800 in the Department of Defense resulting in a Government-wide decrease of 5,600. Table H-l. SUMMARY OF FULL-TIME PERMANENT EMPLOYMENT IN THE EXECUTIVE BRANCH As of June Agency Department of Defense, Military and Military Assistance Post Office Department Subtotal. Department of Agriculture Department of Commerce -. Department of Defense, Civil Department of Health, Education, and Welfare.. Department of Housing and Urban Development. Department of the Interior Department of Justice Department of Labor Department of State Department of Transportation __. Treasury Department Atomic Energy Commission General Services Administration _ National Aeronautics and Space Administration.. Veterans Administration Other agencies: Agency for International Development Civil Service Commission Office of Economic Opportunity Selective Service System Small Business Administration Tennessee Valley Authority The Panama Canal United States Information Agency Miscellaneous Agencies Subtotal. Allowance for contingencies. Total 1 1970 i estimate 1971 i estimate 1,225.877 562,381 1,165,900 567,000 1,110,100 585,000 -55,800 18,000 1,788.258 1,732,900 1,695,100 -37,800 83,425 25,364 31,214 102,941 14,307 58,156 35,106 9,723 24,658 60,386 79,982 7,047 36,176 31,733 147,606 83,000 25,600 30,700 102,500 14,900 59,300 37,600 10,300 23,900 63,600 86,700 7,000 36,400 31,400 148,500 85,300 26,700 31,000 105,100 16,000 61,100 39,100 10,800 23,400 70,300 93,500 6,900 36,800 30,600 150,200 2,300 1,100 300 2,600 1,100 1,800 1,500 500 -500 6,700 6,800 -100 400 -800 1,700 15,753 4,970 2,856 6,584 4,099 11,987 14,731 10,500 26,200 15,000 5,300 2,400 6,600 4,100 12,300 14,700 10,200 27,800 14,400 5,500 2,500 6,500 4,100 13,300 14,900 10,100 28,900 -600 200 100 -100 845,504 859,900 887,100 27,200 10,000 15,000 "Tooo 1,000 200 -100 1,100 2,633,762 2,602,800 2,597,200 ~5,600 Excludes diaadvantaged worker-trainees in the Public Service Careers program. Note: Totals may not add due to rounding. Change 1970-71 1969 actual SPECIAL ANALYSES 101 The employment increase in the civilian agencies for 1971 is required to provide more public services for an expanding population and a growing economy. Ten agencies account for the bulk of the necessary employment increases: (1) The Post Office Department, up 18,000, to service an increase in mail volume and a substantial rise in the number of delivery stops caused mainly by more patrons in suburban areas. (2) The Treasury Department, up 6,800, mainly for rising workloads in Internal Revenue Service operations related to the processing of tax returns filed and audited. (3) The Department of Justice, up 1,500, primarily for increased Federal law enforcement activities and for an expected 11 million additional inspections by the Immigration and Naturalization Service. (4) The Department of Transportation, up 6,700, principally in the Federal Aviation Administration to operate new facilities and to service an increase in landings and takeoffs at airports with FAA control towers. (5) The Department of Housing and Urban Development, up 1,100, primarily in the Federal Housing Administration to process a large increase in mortgage insurance applications and for increased workload in the Fair Housing and Equal Opportunity program. (6) The Veterans Administration, up 1,700, to extend specialized medical services, such as units for intensive coronary care and alcoholic treatment, and to provide better medical care for an increasing caseload. (7) The Department of Health, Education, and Welfare, up 2,600, primarily to handle the increased workload of the Social Security Administration in such areas as processing claims, maintaining earnings records and changing beneficiary status. (8) The Department of Agriculture, up 2,300, largely to service an increaso in the rural housing loan program for low and moderate income families, for increases in food assistance, meat and poultry inspection programs, and for facilitating increased timber sales. (9) The Department of Commerce, up 1,100, for a variety of increased services including more export and travel promotions, improved weather forecasting and the establishment of new air quality control units. (10) The Department of the Interior, up 1,800, mainly to expand coal mine health and safety inspections, to increase educational services for American Indians and to speed up the issuance of construction grants for local waste treatment plants. Offsetting these increases, employment has been reduced in defense, space, and overseas programs. Most of the employment decreases occur in four agencies: (1) The Department of Defense, down 55,800, due to declining manpower requirements. (2) The National Aeronautics and Space Administration, down 800, reflecting the closing of the Electronic Research Center and the slowing pace of the space program. (3) The State Department, down 500, as the Department seeks to accomplish its work with fewer staff. (4) Agency for International Development, down 600, due to a generally reduced level of activity. 102 THE BUDGET FOR FISCAL YEAR 1971 TOTAL FEDERAL PERSONNEL Approximately 89% of total Federal civilian employment is made up of full-time permanent employees. The remainder consists of parttime employees, intermittent employees (those employed on an irregular or occasional basis) and full-time temporary employees (those in positions occupied for less than a year). Total Federal Government employment also includes Armed Services personnel and employment in the legislative and judicial branches. These figures are given in table H-2. Table H-2. TOTAL FEDERAL GOVERNMENT Description Civilian employment in the executive branch: Full-time permanent 1 _ Other than full-time permanent 2 Armed Services personnel on active duty: Department of Defense Department of Transportation (Coast Guard) _ Subtotal Legislative and judicial personnel _ __ Total EMPLOYMENT 1969 actual 1970 estimate 1971 estimate 2,633,762 346,368 2,602,800 322,000 2,597,200 322,000 3,459,423 39,304 3,160,700 38,300 2,908,100 38,700 6,478,857 36,285 6,123,800 5,866,000 6,515,142 1 2 Excludes Public Service Careers disadvantaged worker-trainees in 1970 and 1971. Excludes summer workers under the President's Youth Opportunity Campaign; merchant seamen on vessels under Federal shipping contracts; employees for the 19th decennial census; disadvantaged students employed part time in 1970 and 1971. PERSONNEL COMPENSATION AND BENEFITS Selected data on the total Federal payroll and related costs are shown in table H-3. Table H-3. PERSONNEL COMPENSATION AND BENEFITS (in millions of dollars) Description Total civilian personnel costs: 2 Direct compensation Personnel benefits ____ 1969 actual _ _ _ _ Total Total armed forces personnel costs: Direct compensation Personnel benefits Total 1970 estimate 1 1971 estimate 1 24,663 2,013 26,700 2,200 26,700 2,300 26,676 28,900 29,000 14,519 4,338 15,700 4,400 14,700 4,200 18,857 20,100 18,900 3 _ __ 1 Excludes budget allowance of $0.2 billion for the postal pay adjustment part of the proposed »ostal reform for 1970 and $1.4 billion for military and civilian pay increases for 1971. 2 Excludes Members and officers of Congress. 3 Excludes Reserve components. SPECIAL ANALYSES 103 Direct compensation includes regular pay; special pay for overtime, Sunday, holiday, and standby time; differentials for night work and overseas duty, flight and hazardous duty, etc. Related personnel benefits include the Government's share of Federal retirement and old-age survivors' and disability insurance costs; employees' life insurance, health insurance and benefits, and similar payments; they also include cost-of-living and quarters allowances, uniform allowances (when paid in cash) and, in the case of the military personnel, allowances for subsistence, reenlistment bonuses, and certain other cash payments. The obligations to be incurred for civilian personnel compensation and benefits in 1971 are estimated at $29 billion. Some of the personnel compensation is offset by proprietary receipts and compensation of others is paid from public enterprise funds (such as the Post Office). The cost of these employees, included in table H-3, amounts to over $7.5 billion in 1971. Government pay scales for "blue collar" workers have for many years been subject to administrative adjustment to correspond to local prevailing rates in private industry. As wages in private industry advanced, Federal compensation for such workers also increased. Pay for most other Federal workers has been set by statute. In December 1967, the Congress enacted pay legislation which authorized the President, without additional congressional approval, to set salary rates consistent with the standards set forth in the 1962 Salary Reform Act. The third and final step under the 1967 act was accomplished when Federal pay rates were adjusted in July 1969 to achieve comparability with 1968 private industry salary levels. In order to make Federal salaries comparable to 1969 private enterprise rates, an average civilian and military pay increase of 5.75% is proposed effective in January 1971. An overall allowance of $1.4 billion is carried in the budget to cover this increase for 1971. This figure includes the 1971 cost for adjustments in postal field service pay accompanying postal reform. GEOGRAPHICAL DISTRIBUTION OF EMPLOYMENT The geographical distribution of Federal civilian employment is given in table H-4. Most Federal employees—over 81%—work in the various States. Less than 11% work in the Washington, D.G>, metropolitan area (including nearby Maryland and Virginia). The remaining 8% are in foreign countries and in U.S. territories and possessions. Most of the employees in foreign countries are nationals of the countries in which they work. 104 THE BUDGET FOR FISCAL YEAR 1971 Table H-4. FEDERAL CIVILIAN EMPLOYMENT BY GEOGRAPHICAL LOCATION (as of June 1969) Total employment l Location Washington, D.C., area Alabama Alaska Arizona Arkansas California Colorado Connecticut Delaware Florida Georgia Hawaii Idaho Illinois Indiana Iowa Kansas Kentucky Louisiana Maine Maryland Massachusetts Michigan Minnesota Mississippi Missouri Montana Nebraska Nevada New Hampshire New Jersey New Mexico New York North Carolina North Dakota Ohio Oklahoma metropolitan , __ J 328,077 58,092 15,350 27,644 17,494 326,338 44,143 20,065 4,712 72,488 79,655 29,213 8,428 118,339 44,931 18,588 23,988 38.647 29,869 8,624 3 68,450 68,048 55,275 29,914 21,194 68,620 10,878 16,296 9,027 13,495 70,460 26,974 187,767 38,874 Total employment l Location 24,936 Oregon Pennsylvania Rhode Island South Carolina South Dakota Tennessee Texas Utah Vermont Virginia Washington West Virginia Wisconsin Wyoming Undistributed Summer youth Total United States 149,183 16,143 31,314 9,979 42,686 153,409 41,247 3,811 3 84,041 58,100 13,706 26,701 5,414 *-5,825 -54,174 2,772,081 Outside United States: Territories and possessions Foreign countries Total outside United States. _ _ U.S. citizens Foreign nationals 37,574 206,760 5 244,334 (58,477) (185,857) Total employment Legislative and judicial 3,016,415 -36,285 Total executive branch. __ Distributed as follows: Full-time permanent Temporary, part time, and intermittent 2,980,130 (2,633,762) (346,368) 7,942 105,793 57,718 Distribution by State is partially estimated. Includes employees of the executive branch and of the legislative and judicial branches. Excludes employment within the Washington, D.C., metropolitan area, which includes the District of Columbia and the adjacent counties and cities in Maryland and Virginia. sf" Merchant seamen on vessels under Federal shipping contracts. Excludes 114,658 foreign nationals provided to the Department of Defense unde ments, or other arrangements with foreign governments which provide for the furnishing of personal SPECIAL ANALYSES 105 TRENDS IN WORKLOAD An increasing population and a steadily expanding economy create an unavoidable increase in the volume of work under certain government programs. While defense and space programs have been reduced, domestic programs are increasing in 1971; for example: • Participants in the food stamp program will rise by 38%. • Establishments with Federal meat inspectors will increase by 58% while the volume of poultry inspected will rise by 5%. • The number of persons served by the Federal Medicaid programs will increase by 10%. • There will be a 10% increase in participants in manpower training programs for unemployed and underemployed workers. • There will be a 6% increase in workload of the Social Security Administration in such areas as processing claims, maintaining earnings records, and changing beneficiary status. • Mail volume will increase 2.4% and there will be a substantial rise in the number of delivery stops. • Tax return processing under the Tax Reform Act of 1969 will increase in complexity and there will be an 11% increase in tax returns audited. • FBI investigations are expected to increase by 5,000. • Family planning assistance will reach 2.25 million women in 1971, an increase of 42%. • Landings and takeoffs at airports with FAA towers will increase by over 5%. • The number of persons arriving in this country will increase by 5.4% and cargo entries will increase by 7%. • There will be 11 million additional inspections by the Immigration and Naturalization Service. These are a few of the many workload increases expected in 1971. The growth in related manpower needs is kept to a minimum by requiring steadily greater productivity. POPULATION AND GOVERNMENT EMPLOYMENT COMPARISONS The following chart shows the total Government,Civilian Employment and the ratio of Federal to State and local civilian employment. For the past 20 years the proportion of Federal to total employment in all governmental units has been declining and is estimated to be at 22% in 1971. 106 THE BUDGET FOR FISCAL YEAR 1971 Government Civilian Employment Millions of Employe 14- 10- 01 J942 1945 1950 End of Fiscal Year A historical comparison of total Federal civilian employment in the executive branch (including temporary and part-time employment) with employment by State and local governments and U.S. population for 1942-71 is shown in table H-5. The ratio of Federal civilian employment to population has been decreasing since 196N and is estimated to be 14 per thousand in 1971. 107 SPECIAL ANALYSES Table H-5. GOVERNMENT EMPLOYMENT AND POPULATION, 1942-71 Government employment Fiscal year 1942 1943 1944 1945 1946 1947 . . 1948 . 1949 1950 1951 . -1952 1953 1954 1955 . 1956 1957 1958 .-.1959 1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 (estimate) 1971 (estimate) Population Federal State and All govern- Federal as Total Federal emUnited all governbranch 1 ments units States per 1,000 (thousands) (thousands) (thousands) mental units (thousands) population 2,272 3.274 3.304 3.787 2.666 2.082 2,044 2.075 1,934 2.456 2.574 2.532 2.382 2,371 2,372 2,391 2,355 2,355 2 2,371 2,407 2,485 3 2,490 3 2,469 2,496 2,664 2,877 2,951 45 2,980 5 2.925 5 2,919 3,310 3,184 3,092 3,104 3,305 3,568 3,776 3,906 4,078 4,031 4,134 4,282 4,552 4.728 5,064 5,380 5,630 5,806 6,073 6,295 6,533 6,834 7,236 7,700 8,320 8,898 9,437 9,516 (66) () 5,582 6.458 6,396 6,891 5,971 5,650 5,820 5,981 6,012 6,487 6.708 6,814 6,934 7,099 7,436 7,771 7,985 8,161 8,444 8,702 9,018 9,324 9,705 10,196 10,984 11,775 12,388 12,496 40.7 50.7 51.7 55.0 44.6 36.8 35.1 34.7 32.2 37.9 38.4 37.2 34.4 33.4 31.9 30.8 29.5 28.9 28.1 27.7 27.6 26.7 25.4 24.5 24.3 24.4 23.8 23.8 23.0 22.4 135,361 137.250 138,916 140,468 141,936 144,698 147,208 149,767 152,271 154,878 157.553 160.184 163.026 165.931 168,903 171,984 174,882 177,830 180,684 183,756 186,656 189,417 192,120 194,592 196,920 199,118 201,166 203,635 16.8 23.9 23.8 27.0 18.8 14.4 13.9 13.9 12.7 15.9 16.3 15.8 14.6 14.3 14.0 13.9 13.5 13.2 13.1 13.1 13.3 13.1 12.9 12.8 13.5, 14.4 14.7 14.6 14.2 14.0 1 Covers total end-of-year employment in full-time permanent, temporary, part-time, and intermittent positions except for summer workers under the President's Youth Opportunity Campaign; merchant seamen on vessels under Federal shipping contracts; and beginning in 1970, excludes Public Service Careers program disadvantaged worker-trainees and disadvantaged students employed part time. 2 Includes piece-rate census workers employed for the decennial census. s Excludes 7,41 1 project employees in 1963 and 406 project employees in 1964 for the public works acceleration program. 4 On January 1, 1969, 42,000 civilian technicians of the Army and Air Force National Guard converted by law from State to Federal employment status. They are included in the Federal employment figures in this table after and including 1969. 5 Excludes temporary, part-time, and intermittent employees for the 19th decennial census: 883 in 6 1969, 134,400 in 1970, 3,000 in 1971. An official projection of State and local government employment for 1970 and 1971 is not available. The percentages shown for these years are consistent with a range of reasonable estimates based on recent trends in population and State and local government activity. PART 2 FEDERAL SOCIAL PROGRAMS 109 INTRODUCTION Part 2 furnishes Government-wide program and financial information in six social program areas—education, manpower, health, income security, crime reduction, and housing. It includes the special analyses designated I through N. The figures used in these analyses differ from the data shown under somewhat similarly titled categories of the functional classification used in Part 4 of the Budget and elsewhere. In the functional classification, each activity is categorized according to its major purpose; thus all the military spending of the Department of Defense falls into the functional category, National defense. Tn these special analyses, however, all spending for education, health, etc., is included, even if the activity has a different primary purpose. Thus the tabulations here are more comprehensive with regard to these particular types of social programs. The Government's commitment of resources to these purposes is evidenced in the tabulation below by the totals for 1971 budget outlays in the various analyses. This is not a complete representation, however, since some resources also go into other social programs that are not explicitly covered by a special analysis in this volume. FEDERAL OUTLAYS FOR SELECTED SOCIAL PROGRAMS [In millions of dollars] Outlays Description Special analysis: I. Education J. Manpower K. Health L. Income security M. Reduction of crime N. Housing Deduction for duplications included above Total Civilian agencies Departof Defense All 9,689 3,216 18,604 68,393 1,257 283 -14,726 963 20 1,998 3,193 449 -16 10,652 3,236 20,602 71,586 1,257 732 -14,742 86,716 6,607 93,323 Some activities of the Government serve more than one social purpose; for example, the Medicare and Medicaid programs may be considered as a part of both the Federal health and income security programs. About $11,888 million for 1971 is included in both the health and income security categories. Thus, in adding the six categories to a total, a deduction must be made to avoid double counting. 110 SPECIAL ANALYSIS I FEDERAL EDUCATION PROGRAMS PART I—OVERVIEW Federal budget outlays for education are estimated at $10.7 billion for 1971, an increase of $597 million over 1970 and more than five times the level in 1960. Education outlays represent 5% of all Federal spending compared with only 2% in 1960. Federal programs discussed in this analysis serve two main purposes. The first is to support educational institutions as such, or to support individuals who are attending such institutions. This purpose is achieved principally through activities of the Office of Education (OE), education benefits paid to former servicemen under the GI bill, and payments to students who are children of deceased or disabled social security beneficiaries. Also included are the Head Start, Follow Through, and other education programs funded by the Office of Economic Opportunity (OEO), science education programs in the National Science Foundation, college housing loans in the Department of Housing and Urban Development, education of American Indians under the Department of the Interior, and education of dependents of U.S. military personnel overseas. These activities represent 61% of the total Federal spending for education. The second purpose is to support education as a means for accomplishing other national objectives. Included in this category are such Table 1-1. MAJOR FEDERAL EDUCATION ACTIVITIES (in billions of dollars) Outlay* Program 1969 actual 1971 1970 3.5 .5 .1 .2 3,7 .5 .1 .2 3.9 .5 .1 .2 .2 .6 .5 .3 .9 .5 .3 t.l .5 5.6 6.2 6.5 1.4 .6 1.4 T~4 .5 .1 .2 .7 .6 .1 .2 .8 .6 .2 .2 1.0 Subtotal, other education 3.4 3.9 4.2 Total 9.0 10.1 10.7 Office of Education programs (HEW) Head Start and Follow Through (OEO) NSF science education College housing loans (HUD) Education of American Indians (Interior) and overseas dependents (DOD) GI education benefits ( V A ) . . _ Social security benefits for children in school (HEW) Subtotal, direct support 1 Research at academic institutions (19 agencies) Health and other scientific manpower training ! (9 agencies) Training of Federal and other public employees at educational institutions (12 agencies) Agricultural extension (Agriculture) Education aid to foreign countries (AID) All other ._ * Excludes portion included in Office of Education. Ill 112 THE BUDGET FOR FISCAL YEAR 1971 diverse activities as support of university research to extend medical knowledge, training of manpower to improve delivery of health services, agricultural extension services, Agency for International Development assistance to schools and colleges abroad, and professional training of military officers. Such activities account for 39% of total outlays for education. Table 1-1 identifies the principal groups of Federal activities included in this analysis. Since 1960, Federal education outlays have risen more than $8 billion. Of this amount, $3 billion has been for elementary and secondary education, over an eightfold increase. The Federal investment in higher education has risen by $4 billion and is now almost five times the 1960 level. Federal education funds provide 14% of the total spending in U.S. education institutions. Table 1-2 summarizes the trend in Federal outlays by level of education since 1960. Table 1-2. FEDERAL OUTLAYS FOR EDUCATION (1960-71) (in billions of dollars) Actual Category 1960 1961 Elementary and second0.4 ary Higher 1.1 Adult and other .5 2.0 Total _. Estimated 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 0.5 0.5 0.6 0.6 0.8 2.2 2.8 3.2 3.1 3.3 1 ? 1 ^ 1 6 1 7 ? n ? 7 1 6 4 4 4 4 5.0 5 9 1 ? 1 ? 1 6 1.8 8 8 6 6 3.5 *> 3 9.0 10.1 10.7 2.1 2.4 2.8 3.1 3.6 5.8 7.5 8.8 19 The remainder of part I of this analysis highlights Federal education policies and budget proposals for 1971, and indicates the degree to which different Federal agencies are supporting education. Part II discusses the principal Government programs by level of education. Part III contains technical notes on coverage and scope of the analysis and the relationship to other analyses in the Federal budget. EDUCATION POLICIES AND THE 1971 BUDGET The Government has taken on many new responsibilities in education over the past decade and there are now literally hundreds of separate Federal grants, loans, and direct services. These programs were developed with the expectation that they would improve school programs and raise academic achievement. AH too often this expectation has not been fulfilled. In the field of domestic policy, the Federal Government is placing special emphasis on basic reforms to improve program performance. Major actions are necessary to achieve better performance and vitally needed reform in the critical area of education. The Government is concerned more with the outputs of the Nation's education system (e.g., proportion of students able to read adequately) than with SPECIAL ANALYSES 113 the inputs (e.g., number of teachers). Looking broadly at Federal education programs, the purpose of the Government and its role and direction in education can be organized under six points. These points and the principal budget outlay data which are pertinent to them are highlighted in the following paragraphs. First, broader support is required for State and local government. New initiatives of the Administration which will fundamentally affect education include (a) a proposed plan for sharing a fixed and growing portion of the Federal tax base with the States to use as they determine, (b) a reform of the Nation's failing welfare system which will free States of a significant portion of fast-growing welfare costs and lead to a more stable home environment for thousands of children, and (c) consolidation of narrow purpose elementary and secondary grants into broader purpose ones to give States more choice in use of funds. More grant consolidations will be proposed for the coming year. Second, greater use will be made of research, experimental projects, and systematic evaluation to develop better approaches to education. The Nation should apply those techniques for advancement and renewal which have been successful in such fields as agriculture and space. Budget outlays (dollars in millions) • Office of Education research, development, and evaluation _ _ ._ • Follow Through. ._. • OEO experimentation in education _ • Vocational exemplary projects _ • Dropout prevention projects _. 1970 estimate 1971 estimate Change 102 46 4 6 7 114 55 14 17 10 +12 +9 +10 +11 +3 Third, more emphasis will be given to needs of younger children where the developmental process is still underway. This is a critical period in which educational deprivation often begins and the future course of a life may be determined. Budget outlays (dollars in millions) 1970 estimate • Head Start experimental projects • Office of Child Development planning, coordination, research, and statistics • OEO day care experimentation 1971 estimate Change 8 16 +8 2 5 20 +5 +18 Fourth, the budget proposes reduction, redirection or elimination of activities which are outdated, which fail to achieve their objectives, or which are not reaching high priority targets. Legislation will be proposed to revise the authorizations for payments to schools in federally affected areas, a program which provides funds disproportionate to the financial impact of Federal property on school tax revenues and often far in excess of fiscal need. The budget also proposes termination of operational grants to land-grant institutions; such funds are but a minute source of revenue for these institutions which collectively are among the strongest and most prestigious institutions of higher education in the Nation. 390-700 O—70 8 114 THE BUDGET FOR FISCAL YEAR 1971 Budget outlays (dollars in millions) • Assistance to schools in federally affected areas • Assistance to land grant colleges • University extension 1970 estimate 397 12 9 1971 estimate 340 2 Change —57 —12 —7 Fifth, the Federal Government will, as a primary objective, support programs for individuals who need special educational services in order to realize their full potential. For example, in 1971, it is estimated that outlays for education of individuals from low-income families will total $2.8 billion, or 26% of the total Federal education spending. Budget outlays (dollars in millions) 1970 estimate • Title I, education of the disadyantaged • Grants, work-study, and special services for college students from low-income families • Social security payments for youth in school or college _ 1971 estimate Change 1,140 1,249 +110 340 381 +41 +22 474 496 • Agricultural extension programs 130 171 +41 • Education of American Indians • Model Cities grants 153 50 165 100 +12 +50 Sixth, greater use will be made of the resources of the private credit market to assist individuals and institutions in meeting heavy one-time costs which can be repaid over a period of years. Through Federal guarantees and subsidies, $1.7 billion is estimated for support of education in 1971 in addition to the Federal outlays reflected in this analysis. Budget outlays (dollars in millions) • Guaranteed loans to Students: Interest costs paid by Federal Government (Total volume of loans made to students by private lenders) ... • Construction of college academic facilities: Interest costs paid by Federal Government (Total volume of loans made to institutions by private lenders) . . _. • Construction of college housing facilities: Cumulative interest contracted by Federal Government (Total volume of loans made to institutions by private lenders) 1970 estimate 1971 estimate 109 140 Change +31 (794) (940) (+146) 10 20 +10 (435) (478) (+43) 12 21 (50) (240) +9 (+190) In addition to the foregoing actions reflected in the 1971 budget, significant changes are occurring in other activities included in the Education special analysis. Educational benefits for returning servicemen will increase from $894 million in 1970 to an estimated $1,078 million in 1971. These amounts provide for increased levels of participation of veterans in such benefits and for needed increases in the payment rates to keep abreast of rising costs. Increases are also estimated for training of health services manpower ($78 million), research and development at academic institutions ($26 million) and support of education in foreign countries under AID programs ($30 million). 115 SPECIAL ANALYSES FEDERAL SUPPORT OF EDUCATION BY AGENCY Table 1-3 provides a summary of total Federal outlays for education by administering agency. It shows that only two-fifths of these outlays are for programs administered by the U.S. Office of Education, the Federal Government's principal agency for education programs. Other parts of the Department of Health, Education, and Welfare account for one-fifth of all Federal outlays for education, primarily for medical education and research programs conducted at colleges and universities. The remaining two-fifths of total Federal education outlays are distributed among 24 Federal departments and agencies, of which the largest shares are accounted for by the Department of Defense, the Veterans Administration, the National Science Foundation, and the Office of Economic Opportunity. Table 1-3. FEDERAL OUTLAYS FOR EDUCATION BY AGENCY (in millions of dollars) Federal agency Agriculture _ Defense Health, Education, and WelfareOffice of Education Other HEW Housing and Urban Development Interior National Science Foundation Office of Economic Opportunity. Veterans Administration Other 1 .... . . Total Federal outlays 1960 1969 actual 1970 estimate .1971 Estimate Percent Actual Percent 109 338 5 17 190 897 243 937 299 963 3 9 450 197 203 67 22 10 120 6 3,473 1,565 180 215 3,737 1,772 285 273 3,867 1,913 264 309 378 179 19 9 719 756 980 810 1,170 835 36 18 2 3 5 5 11 8 2,041 100 9,008 10,055 10,652 100 10 488 525 489 529 489 542 1 Includes Commerce, Justice, State, Transportation, AEC, AID, NASA, National Foundation on the Arts and the Humanities, Small Business Administration, Smithsonian Institution, TVA, USIA, GPO, and Library of Congress. PART II—FEDERAL OUTLAYS FOR EDUCATION BY LEVEL PRESCHOOL, ELEMENTARY, AND SECONDARY EDUCATION In 1971, outlays for preschool, elementary, and secondary education will amount to $3,490 million, an increase of $198 million over 1970. Federal funds supply about 8% of national expenditures on elementary and secondary education in public and nonpublic schools. Table 1-4 displays Federal outlays by agency and major program. Nearly two-fifths of the total is for Title I of the Elementary and Secondary Education Act providing support for school remedial, health, and other services for children from low-income families. Head Start and assistance to schools in federally affected areas each represent one-tenth of the total Federal outlays. Table 1-5 displays Federal outlays by sublevel and type of support. The following paragraphs describe current Federal actions by sublevel. 116 THE BUDGET FOR FISCAL YEAR 1971 Table 1-4. FEDERAL OUTLAYS FOR PRESCHOOL, ELEMENTARY AND SECONDARY EDUCATION BY AGENCY AND PROGRAM (in millions of dollars) Agency and program Office of Economic Opportunity: Head Start Follow Through Neighborhood Youth Corps in school Other Defense: Education of overseas dependents Health, Education, and Welfare: Office of Education: Educationally deprived children Education of the handicapped Dropout prevention and bilingual education Aid to federally affected areas Supplementary services Education professions development Vocational education Educational research and development Civil rights education Other___.__ Social Security (student benefits) Other HEW programs Interior: Indian education Other National Science Foundation: Science education. Other Federal agencies Total 1969 actual 1970 estimate 1971 estimate 350 18 61 14 324 46 62 13 327 55 62 39 108 128 135 1,073 54 1 398 322 65 154 83 8 38 91 16 1,140 70 14 397 209 126 179 91 14 36 95 19 1,249 78 19 340 173 130 205 98 26 38 99 31 104 14 59 55 124 18 55 132 134 28 48 176 3,087 3,292 3,490 Table 1-5. FEDERAL OUTLAYS FOR PRESCHOOL, ELEMENTARY AND SECONDARY EDUCATION BY SUBLEVEL AND TYPE OF SUPPORT (in millions of dollars) Sublevel and type of support Total preschool, elementary and secondary Preschool ___ Elementary and secondary Vocational education Other. Current operations Facilities and equipment Student support Teacher training Educational research _ 1969 actual 1970 1971 3,087 3,292 3,490 416 2,172 226 272 408 2,261 268 355 447 2,368 298 377 2,581 123 99 148 136 2,660 124 104 215 189 2,796 122 110 218 244 SPECIAL ANALYSES 117 Preschool.—Research findings strongly support the contention that a child's potential is determined to a significant extent by the nature of his environment during the first 5 years of life. In order to break the chain of inherited disadvantage from poverty, it is necessary to reach children before they enter school. Many questions remain unanswered as to what action should be taken by persons outside the family and what objectives are to be accomplished. The Federal Government is supporting the exploration of such questions through several complementary efforts. Those included in the tabulations of this special analysis are: • A new Office of Child Development (OCD), created in the Department of Health, Education, and Welfare to provide leader^ ship and coordination for all Federal programs for preschoochildren. • Head Start, funded by the Office of Economic Opportunity and administered by OCD, providing a variety of services—educational, medical, and social—for 248,000 three- to five-year-old children. The results of recent studies on the retention of developmental gains made by Head Start children have been disappointing. Consequently, increased funding is allowed in 1971 for systematic testing of a variety of approaches to preschool. • Kindergarten and prekindergarten supported under Title I of the Elementary and Secondary Education Act at the option of local school districts. • The Office of Economic Opportunity program of day care experimentation in 1970, which will be continued and expanded in 1971. Analysis will be made of the total need for day care, of the costs of day care services under varying conditions and of alternative methods of service organization and delivery. • Preschool and day care activities supported through a portion of the Model Cities grants, made by the Department of Housing and Urban Development. Other programs, not included in Special Analysis I tabulations, also support services which have a potentially significant impact on development of child learning abilities: • Day care services provided through Federal manpower and socia service programs. Principal efforts include Work Incentive train" ing and day care, and funds for social services supported by Assistance to Families With Dependent Children and Child Welfare grants under the Department of Health, Education, and Welfare. The Administration has proposed in the Family Assistance Program (FAP) to expand and improve day care services for Family Assistance recipients. • Nutrition programs of the Department of Agriculture and health research being conducted by the National Institute of Child Health and Human Development. 118 THE BUDGET FOR FISCAL YEAR 1971 Table 1-6 details the enrollment of children in federally supported preschool programs. (Note: no estimates available for Model Cities program). Table 1-6. NUMBER OF CHILDREN ENROLLED IN PRESCHOOL PROGRAMS (in thousands) 1969 Head Start: Full year Experimental __ Title I—ESEA-_ 0 E 0 day care experimentation.. 217 __ Work Incentive day care (HEW) Other HEW day care 1 Other (manpower, OEO local initiative) Subtotal, not included in education analysis 1 . . _ 342 248 10 342 5 15 559 601 615 4 28 2 27 38 3 65 44 34 68 112 593 669 111 __ . . __ 1971 248 6 342 . _ Subtotal, included in education analysis Total 1970 3 Includes children supported by non-Federal funds in the Child Welfare Services Program. Elementary and secondary.—The important features of the 1971 budget involve efforts to make Federal programs function more successfully and provide broader support for State and local school systems. Simplification of grant administration and decentralization of decisionmaking in education will be furthered. A principal example of this effort is the proposal to consolidate four separate State formula grants—for books, equipment, counseling, and exemplary services— administered by the Office of Education. States will be encouraged to use this consolidated grant to fund "start up" costs associated with new education models. The administration's proposals for Federal revenue sharing and welfare reform will have significant impact on the financing of elementary and secondary education. The Federal revenues to be returned to the States each year in increasing amounts will be used by States and local governments as they see fit and without Federal strings. Education, which accounts for over two-fifths of State and local government spending, is certain to be a major beneficiary of this revenue sharing measure. Also, the proposed welfare reform will lift from the States and local governments much of the pressure from rising welfare costs which have drained away funds from other purposes, such as education. The Federal Government will undertake SPECIAL 119 ANALYSES a review of the financial structure of elementary and secondary education, leading to basic reforms which will place the financing of our schools on a sound and stable basis. The Federal Government will also focus increasingly on actions which will lead to improved educational performance at the elementary-secondary school level. The 1971 budget provides for expansion of research and experimentation activities to develop more effective techniques, as discussed below. A major review of the compensatory education programs for the poor under title T of the Elementary and Secondary Education Act is being conducted in order to increase the effectiveness of these Federal funds. The budget also places a special emphasis on programs to develop, evaluate and disseminate better techniques for education of children whose learning ability is impaired by physical and mental handicaps. A reform of school assistance to federally affected areas will be proposed to concentrate payments on those districts where Federal impact is greatest. Table 1-7 indicates the number of children participating in federally aided programs for the disadvantaged in elementary and secondary schools. Table 1-7. NUMBER OF CHILDREN AIDED BY ELEMENTARY AND SECONDARY PROGRAMS FOR THE DISADVANTAGED (in thousands) Program Education of children from low income families, Title I. Follow Through __ _ Dropout prevention Bilingual education _ _ _.. Special classes for mentally and physically handicapped American Indians _ 1969 actual 1970 estimate 7,558 7,558 35 42 27 182 57 62 80 36 182 59 1971 estimate 7,558 70 80 36 182 62 Vocational education.—The Federal Government has supported vocational education programs through grants to States since 1917. With Federal assistance, vocational programs are being redirected to broader and more technological training, to occupational preparation for students not going on to college and to geographic areas of high unemployment and school dropout. This redirection will require the development of new and improved course offerings, the provision of closer ties between schools and employers and a focus on the special needs of the disadvantaged and the handicapped. The 1971 budget provides increased funds for Office of Education grants to States for (a) cooperative programs which combine part-time work in private industries and public agencies with related schooling; and (b) project grants to States, local schools and other agencies to develop, dem- 120 THE BUDGET FOR FISCAL YEAR 1971 onstrate and test improved vocational techniques and curricular materials. The Department of Labor administers the Neighborhood Youth Corps in-school program which provides grants for work and studyprograms to help financially needy youths to remain in school. Grants are also made for construction of vocational schools by the Appalachian Regional Commission, a cooperative Federal-State economic development agency. In addition to the $298 million in outlays for these vocational education programs in secondary schools in 1971, the Federal Government will spend $126 million for vocational and technical education programs in post-secondary technical schools and junior colleges and for programs for adults who wish to upgrade their vocational skills. Table 1-8. NUMBER OF SECONDARY SCHOOL STUDENTS IN VOCATIONAL EDUCATION (in thousands) Vocational program Occupational programs: Office of Education: Basic grants to States Cooperative work education Department of Labor: Neighborhood Youth Corps in-school program Subtotal, occupational Consumer and homemaking education: Office of Education. 1969 actual 1970 estimate 1971 estimate 2,849 3,273 88 3,693 150 100 100 100 2,949 1,500 3,461 1,500 3,943 1,500 Other programs.—Outlays in this category are primarily for support of educational research, development and demonstration projects, and education personnel training programs. The Federal Government is a major source of funds for support of education research and development. In 1971, outlays for this purpose are estimated to increase by $55 million to $244 million. New initiatives of the Government include support for (a) experimental schools to develop and evaluate changes in curricula, staffing, and organization as they affect student performance in actual school situations (Office of Education) and (b) a variety of research and experimental projects (Office of Economic Opportunity), including a test of the effectiveness of educational "vouchers". The 1971 budget also puts greater emphasis on evaluation of existing Federal aid programs, and supports an expansion of a national assessment of educational achievement being conducted by the Education Commission of the States. Table 1-9 summarizes the Federal education research and development outlays by program and agency. 121 SPECIAL ANALYSES Table 1-9. FEDERAL OUTLAYS FOR PRESCHOOL, ELEMENTARY, AND SECONDARY EDUCATION RESEARCH AND DEVELOPMENT (in millions of dollars) Agency/Program Office of Education: Experimental schools District of Columbia Model School R. & D. laboratories, centers, general research Handicapped children Vocational exemplary projects Dropout prevention National assessment, statistics, and evaluation studies _ All other _. Office of Economic Opportunity: Follow Through Head Start evaluation and research Other education R. & D All other (primarily National Science Foundation) Total. 1969 1970 1971 ittimtte 2 3 I 1 70 11 6 7 10 8 6 3 57 12 17 10 20 16 18 2 8 17 46 8 4 15 55 16 14 17 136 189 244 * 75 10 •Less than $500 thousand. Federal assistance is provided through several agencies to strengthen teaching resources. The 1971 budget places priority on (a) attracting individuals with varying interests, abilities, and experience to careers in education, (b) increasing the efficiency of school staff through use of pupil tutors and teacher aids, and (c) improving the quality of education for the disadvantaged through retraining of existing staff. Federal grants assist the training of staffs from entire schools within poverty areas and "on-the-job" training for education personnel, especially through the Career Opportunities Program. In addition, grants are made to provide upgrading in the basic subjects of reading, writing and mathematics for teachers in desegregating schools. This latter program complements assistance authorized by the Civil Rights Act of 1964 which authorizes seminars and short-term institutes for schools about to desegregate. The number of education personnel trained in these federally assisted programs is shown in table 1-10. ' • * Table 1-10. NUMBER OF TEACHERS AND OTHER EDUCATION PERSONNEL RECEIVING TRAINING Agency and program Office of Education: Education Professions Development Act: Teacher Corps Career Opportunities Program Teachers in desegregating schools State grants Retraining other experienced teachers . Civil Rights Educational Assistance Teachers of the handicapped Office of Economic Opportunity: Head Start: Short-term training National Science Foundation Total 1971 stimate 1969 1970 3,594 4,843 864 12,700 39,125 8,468 18,864 4,389 8,000 12,000 12,700 31,463 11,020 15.928 5,282 8,650 20,000 12,700 45,996 20,750 16,865 50,000 40,055 50,000 45,195 50,000 29.433 178,513 190,695 209,676 122 THE BUDGET FOR FISCAL YEAR HIGHER 1971 EDUCATION Federal outlays for higher education will total $5.3 billion in 1971. This is 50% of total Federal outlays for education and about onequarter of the estimated total expenditures of U.S. colleges and universities in 1971. Table 111. FEDERAL OUTLAYS FOR H I G H E R EDUCATION BY AGENCY A N D PROGRAM (in millions of dollars) Agency and program 1969 Defense: Academic research Other Subtotal, Department of Defense Health, Education, and Welfare: Office of Education: Student aid: Educational opportunity grants Work-study NDEA loans Insured loans Facilities—grants and loans Other OE programs._ __ . Subtotal, Office of Education _ __ _. _ Other Health, Education, and Welfare: Academic research-health sciences Fellowships and traineeships-health professions N I H facilities construction Social and rehabilitation research and training Social Security (student benefits) Other Subtotal, Other Health, Education, and Welfare Housing and Urban Development: College housing Other _ _ _ _ _ Veterans Administration: Readjustment benefits-Other _ . _ . National Science Foundation _ Other Total, higher education . _ _ 1970 1971 243 86 225 90 224 93 329 315 317 91 95 187 138 160 162 176 160 142 44 122 155 418 245 417 276 431 269 1,080 1,275 1,333 545 580 594 390 11 39 366 37 452 148 42 379 48 513 161 43 397 65 1,450 1,649 1,773 178 1 226 9 150 16 516 73 301 450 708 84 298 472 854 91 316 436 4,379 5,036 5,285 Table 1-11 indicates the major Federal agencies and programs contributing to higher education. The Department of Health, Education, and Welfare provides the largest amount of support with 59% of total Federal expenditures. Major Federal programs include: (a) grants 123 SPECIAL ANALYSES and loans to undergraduate students by the Office of Education; (b) grants and loans for the construction of facilities by OE, NIH, and the Department of Housing and Urban Development; (c) fellowship and traineeship programs by several agencies; (d) project grants for academic research by several agencies; and (e) payments to college students from the Veterans Administration and the Social Security Administration. Table 1-12 indicates how Federal funds are distributed by type of institution. In 1971, 2-year institutions are estimated to receive 11% of Federal outlays, 4-year institutions, 38%, and graduate and professional schools, 49%. Table 1-12. FEDERAL OUTLAYS FOR HIGHER EDUCATION BY TYPE OF INSTITUTION (in millions of dollars) 1969 actual Types of institution 2-year institutions Other undergraduate Graduate and professional Other __. Total 1970 estimate 1971 400 1,633 2,275 71 500 1,967 2,488 81 566 2,012 2,613 94 4,379 5,036 5,285 Table 1-13 shows Federal expenditures for higher education by type of support. Approximately 44% of the Federal funds are used for student aid, 27% for institutional aid and 29% are for research and training. The following paragraphs discuss current Federal activities by type of support. Table 1-13. FEDERAL OUTLAYS FOR HIGHER EDUCATION BY TYPE OF SUPPORT (in millions of dollars) Type of support Student support Institutional support: Current operations Facilities and equipment Research and training: Academic research _ Educational research Teacher training Total . 1970 estimate 1971 estimate 1,688 2,084 2,315 452 761 558 875 587 816 1,365 11 87 1,3?8 39 92 1,418 48 101 4,379 5,036 5,285 1969 Actual - _ - - Student aid.—Funds for student aid programs will total an estimated $2.3 billion in 1971. Grant programs for low-income students, veterans educational benefits, and subsidized loan programs for all students using private capital are growing rapidly. A total of 3.5 million graduate and undergraduate students will be aided from 1971 funds. 124 THE BUDGET FOR FISCAL YEAR 1971 The Office of Education administers student aid programs which mainly assist undergraduates. Three of these programs have been initiated to help increase the number of capable but economically disadvantaged students entering college: • Educational opportunity grants providing assistance for students of exceptional financial need; • Direct ("NDEA") loans providing low-interest, long-term repayment loans to needy students; • Work-study grants assisting students earning a portion of their college expenses through employment opportunities. The Guaranteed Student Loan Program is available to students of all income levels. While the student is in school, the Government pays the interest on loans made by private lenders. After graduation the student pays the interest up to a maximum rate of 7%. A special allowance, currently 2]^% of the principal amount of insured student loans, is paid to lenders when financial market conditions make such payments essential to achieve the purposes of the program. Table 1-14. UNDERGRADUATE STUDENT S U P P O R T i (outlays in millions of dollars; number of students in thousands) Total outlays Agency 1969 actual Defense Health, Education, and Welfare Office of Education Social Security Administration Health agencies and other Veterans Administration National Science Foundation Total 1 __ _ 1970 estimate Number of students 1971 1969 1970 1971 estimate 27 32 34 220 179 179 765 932 1.004 1.985 2.116 2,291 377 366 21 531 379 21 581 397 26 1,563 376 46 1,681 397 38 1,835 418 38 429 5 582 4 701 4 543 3 699 3 766 4 1,225 1,550 1,744 2.751 2,997 3,240 Involves some duplication because students may be assisted under more than 1 program. Tables 1-14 and 1-15 indicate the funds expended and the awards made to undergraduate and graduate students by major agency. The Veterans Administration will provide grants to 917 thousand returning veterans who are enrolled at institutions of higher education. Outlays of $397 million will be paid in 1971 under provisions of the Social Security Act to students who are the children, under age 22, of retired, deceased, or disabled beneficiaries. Finally, several Federal agencies offer fellowships and traineeships to support graduate, professional, and postdoctoral students in a variety of fields. A total of 118 thousand such students will be aided in 1971. 125 SPECIAL ANALYSES Table 1-15. G R A D U A T E S T U D E N T S U P P O R T * (outlays in millions; number of students in thousands) Total Outlay* Agency 1969 actual 239 Health, Education, and Welfare... Office of Education Health agencies Other _ Veterans Administration National Science Foundation Other Total 1 _ Number of students 1971 1970 estimate estimate 268 278 1969 actual 121 1971 1970 estimate estimate 107 107 41 55 53 4 3 2 182 16 194 18 207 18 101 16 92 12 93 12 W~ 211 41 15 24T 101 138 48 15 8 5 8 4 15? 463~ 535 571 235 257 38 12 7 4 269 Involves some duplication because students may be assisted under more than 1 program* Institutional support.—Federal outlays for institutional support will total $1.4 billion in 1971 with $587 million for current operations and $816 million for facilities and equipment. The primary elements of aid under current operations in table 1-13 are: • Cost-of-education allowances paid to institutions of higher education as a part of fellowship and traineeship grants, largely in the natural and health sciences, by the National Science Foundation and HEW; • Grants to institutions made by HEW for the training of students in the health professions and rehabilitation services; • Grants made by the Office of Education to developing colleges which are not yet quality academic institutions and to college libraries; • Department of Defense funds for college ROTC activities. The Department of Housing and Urban Development and the Office of Education support the construction of college and university classrooms, laboratories, libraries, and dormitories. The method of support has been shifting from direct Federal grants and loans to Federal interest subsidy payments on loans made to institutions of higher education by private lenders. Approximately $500 million in loans for new construction will be supported by the Office of Education interest subsidy payments. About $300 million of new construction will be supported by the HUD college housing program. Grants are also made by the National Institutes of Health for construction of health facilities at medical, dental, nursing, and other health professions schools and by the National Science Foundation for construction of university science facilities and the renovation of graduate laboratory space. Research arid training.—Federal outlays of $1.6 billion for research and training in 1971 include $1,418 million for academic research, $48 million for educational research, and $101 million for teacher training. Funds for educational research will support experimental projects to study and test means of changing traditional structures and curricula 126 THE BUDGET FOR FISCAL YEAR 1971 in higher education. The National Science Foundation will support programs to upgrade science curricula and facilitate the incorporation of computers in college instruction. Research on 2-year institutions will be supported by the Office of Education. Several Federal agencies support programs for the training of college and university personnel. The National Science Foundation supports fellowships, institutes, and research training to improve the competence of college teachers. Under the Education Professions Development Act, the Office of Education will give special attention to personnel development in junior colleges, technical institutes, and liberal arts colleges. Training models for new careers in higher education and experiments with innovative training techniques will be used in the Office of Education program. Federal support of academic research represents about two-thirds of the total expenditures for sponsored research performed by universities. The major agencies supporting research are HEW (medical, health, and welfare research), DOD (research related to military requirements), and the National Science Foundation (research in all fields of science). In 1971, increased emphasis will be placed on research related to major domestic problem areas and environmental issues. Federal support of academic research is discussed also in Special Analysis Q, Federal Research, Development and Related Programs. ADULT EDUCATION AND OTHER ACTIVITIES A significant portion of Federal outlays for education are devoted to adult and various community education programs. In 1971, the estimated Federal outlays for these programs will total $1.9 billion, or 18% of all Federal education expenditures. These outlays are summarized in table 1-16. Table 1-17 provides information on the number of people benefiting from these programs. Table 1-16. FEDERAL OUTLAYS FOR ADULT EDUCATION AND OTHER ACTIVITIES (in millions of dollars) 1969 Adult and continuing education: Adult basic Extension Continuing education Public library services . Public broadcasting National Foundation on the Arts and the Humanities . Subtotal . Training of public employees: Federal civilian _ . . State and local Federal military Subtotal. Foreign educational activities Other Total... - - . 1970 1971 67 97 75 130 85 171 195 68 257 55 290 42 9 8 21 15 30 24 445 554 641 21 22 428 22 46 458 22 52 478 470 525 552 278 348 268 380 292 391 1,541 1,727 1,876 SPECIAL ANALYSES 127 Adult and continuing education.—This category includes Federal programs which provide educational opportunities for adults who either have not participated fully in the formal educational process in their youth or wish to continue their acquisition of knowledge and skills through less formal means. Adult basic education classes enrolling over 700 thousand men and women who have had less than 8 years of formal schooling will be supported by outlays of $85 million in 1971, mostly by the Office of Education and the Office of Economic Opportunity. These programs, largely in low-income areas, will enable adults to overcome English language limitations and to prepare for occupational training leading to more profitable employment. The Department of Agriculture will spend $171 million in 1971 to support instruction in agriculture, home economics, and related subjects through land-grant college extension activities. Increases will provide for nutrition education and professional assistance in community development. The Office of Education will support vocational education programs for 2.5 million adults who will upgrade or acquire new work skills. Over 350 thousand individuals will benefit in 1971 from the Veterans Administration readjustment benefits programs to provide adult and continuing education for veterans and the children, widows, and wives of deceased or seriously disabled veterans. The Defense Department will support off-duty education programs for 370 thousand servicemen in 1971. Other programs covered by this category totaling $96 million in 1971 include: • Office of Education grants to States for public library services and educational broadcasting facilities. • The Federal grant to the Corporation for Public Broadcasting, a publicly supported, private nonprofit institution, providing operating assistance and interconnection of local educational TV stations and financing new public television and radio programs. • The National Foundation on the Arts and the Humanities which aids various cultural activities, supports State arts councils, and funds programs in colleges and universities to improve the quality of instruction in the humanities. Training of public employees.—This analysis includes Federal programs designed to assist public employees in increasing their professional skills through graduate education and other courses at educational institutions. Inservice and on-the-job training are excluded since educational institutions are not involved. The military services account for the major part of this continuing education effort ($478 million or 87% in 1971), utilizing both institutions of higher education and their own educational facilities. Training of civilian employees of the Federal Government, as well as State and local employees, is supported by the various branches of the Armed Forces, the Foreign Service Institute in the Department of State, the law enforcement training program of the Department of Justice, and the public health and rehabilitation manpower activities of HEW. In 1971, an estimated 20 thousand Federal civilian, 412 thousand State and local, and 385 thousand military personnel will receive some type of graduate, professional, or other education. 128 THE BUDGET FOR FISCAL YEAR 1971 Table 1-17. NUMBER OF INDIVIDUALS BENEFITING FROM FEDERAL PROGRAMS FOR ADULT EDUCATION AND OTHER ACTIVITIES (in thousands) Sublevel and program Adult and continuing education: Adult basic Vocational education Other continuing education Training of public employees: Federal civilian State and local Federal military 1969 1970 599 2.497 1,948 659 2.507 2.092 725 2.512 1.638 19 293 390 19 392 379 20 412 385 1971 Foreign education.—The Federal Government supports foreign students attending colleges and universities in the United States and provides assistance to educational institutions in foreign countries. The principal Federal agencies involved are the Agency for International Development, the Peace Corps and the Department of State. Other Federal support for education.—This category covers a number of Federal activities that do not fall conveniently into any other categories. This includes the Library of Congress and the National Agricultural Library, the educational activities of the Smithsonian Institution, and the Small Business Administration, $92 million for Bureau of Indian Affairs welfare and training programs, and $129 million for research supported by the National Science Foundation outside academic institutions. PART III—COVERAGE OF THE EDUCATION SPECIAL ANALYSIS This analysis includes all Federal programs which have the direct support of educational activities as a major purpose or which involve the use of educational resources to achieve other purposes. For this analysis, education is defined as (1) a student-teacher relationship primarily for the transmission of organized knowledge, as distinguished from occupational skill, or (2) the provision of services to the community at large aimed at expanding individuals' opportunities for professional or career advancement, for civic involvement or for a more meaningful and satisfying leisure. Any Federal program with outlays of $500,000 or more which supports any educational activity meeting this definition is included in this analysis. This analysis does not include scientific research conducted outside of academic institutions (other than that in laboratories and other science projects of the National Science Foundation and Smithsonian Institution). Also, it does not include scientific research conducted in university-managed centers under Federal contracts. Finally, it excludes the school lunch and special milk programs, university service contracts—for example, to operate mental health centers—and many inservice training programs for Federal civilian employees. Relationship to other special budget analyses and budget Junctions.—All programs classified in the budget functional category for education (see part IV of the Budget Document) are included in this special 129 SPECIAL ANALYSES analysis. These include all the programs of the Office of Education and the National Science Foundation, as well as Office of Economic Opportunity education activities, college housing loans and education of American Indians. For 1971, outlays for programs classified under the budget functional category of education total $5.4 billion. In addition this analysis includes outlays of $5.3 billion for 1971 for programs classified under such other budget functional categories as "national defense" and "health." These activities use education— most often graduate training or research at academic institutions—as a means of accomplishing their primary objectives. The amounts tabulated in this analysis include some programs also covered in other special analyses. For example, outlays of about $1.5 billion in 1971 are included in both this analysis and Special Analysis K, Federal Health Programs, for university and other postsecondary programs which help train medical personnel. In addition, approximately $1.5 billion in outlays for 1971 for research in academic institutions are reflected in both this special analysis and Special Analysis Q, Federal Kesearch, Development and Related Programs. Table 1-18 summarizes the outlays included in this analysis which are also included in other special analyses, and by major budget functional categories. Table 1-18. FEDERAL EDUCATION OUTLAYS BY MAJOR BUDGET FUNCTIONAL CATEGORIES AND RELATIONSHIP TO OTHER SPECIAL BUDGET ANALYSES (in millions of dollars) Major functional category and special budget analysis Functional categories: Education Other categories: National defense International affairs and finance Space research and technology Agriculture Natural resources Commerce and transportation Community development and housing Manpower Health . Income security Veterans benefits and services General government Special analyses: Federal health programs Federal manpower programs Federal income security programs _. Federal research, development and related programs 390-700 O—70 9 1969 actual 1970 estimate 1971 estimate 4,835 5,253 5,389 1,012 275 160 163 1,054 263 1,073 295 113 51 48 98 61 144 204 64 68 155 62 1,010 1,181 517 719 60 540 980 78 1,214 1,398 89 457 109 474 1,426 1,449 255 67 74 211 62 1,269 574 1,170 97 1,495 119 496 1,475 SPECIAL ANALYSIS J FEDERAL MANPOWER PROGRAMS COVERAGE AND SCOPE OF T H I S ANALYSIS Almost all public and private economic activities affect the size, composition, and quality of the work force. A limited grouping of Federal programs, described in this special analysis, are intended to influence directly the quality and composition of the work force by increasing the skills and employment opportunities of individuals in the work force, or those who desire to be in it but who are vocationally unprepared or face other barriers to employment. The programs provide skill training, rehabilitation, job placement, temporary employment, and related social services such as day care. One method of differentiating these training programs is by their operating characteristics. Generally the programs: (1) operate outside the normal educational processes; (2) provide services for periods of less than 1 year; (3) provide skill training and job opportunities for nonprofessional jobs; and (4) are targeted to the disadvantaged sector of the population. The analysis covers all programs classified as Manpower Training in the functional code of the budget, and some programs from other functional classifications such as Health and Welfare, National Defense,1 and Veterans. It excludes all professional training and programs which are part of the normal educational process, such as vocational education. These are included in Special Analysis I, Federal Education Programs. 1971 BUDGET OVERVIEW The 1971 budget provides $3.2 billion for manpower programs, an increase of 20% over 1970 and 55% over 1968. The increase reflects the importance of manpower programs in helping the disadvantaged to become self-sufficient through regular employment. Within the $535 million increase in 1971 over 1970, the following programs will receive special emphasis : • $154 million for the Job Opportunities in the Business Sector (JOBS) program, which has been revised and expanded from the 131 largest cities to a nationwide basis. • $61 million for the Work Incentive (WIN) program, which will provide job training for 180,000 welfare recipients and day care for 233,000 children. • $52 million for the Vocational Rehabilitation program to rehabilitate 288,000 handicapped individuals. • $30 million for increased costs of the Employment Service including Job Banks in 25 additional cities. 1 This year the coverage of this special analysis has been changed to exclude the skill training programs for military personnel conducted by the Department of Defense. This effort, while increasing civilian skills, is conducted primarily for national defense purposes. Project 100,000 and Project Transition continue to be included. 130 131 SPECIAL ANALYSES • $26 million for the Public Service Careers program, a major new on-the-job training effort in the public sector. • $25 million for the additional first-year costs of the proposed Manpower Training Act. The number of new enrollees will reach 2.1 million in 1971, an increase of 173,000 over 1970. The distribution of this increase highlights the priorities in the 1971 budget: • 47,000 or 27% in the Work Incentive program; • 46,000 or 27% in JOBS/OJT; • 22,000 or 13% in the Neighborhood Youth Corps out-of-school program; • 20,000 or 12% in the Vocational Rehabilitation program; • 15,000 or 9% in On-the-job training for veterans; and • 23,000 or 13% in all other programs. The following table summarizes the distribution of Federal funds and individuals enrolled during the period 1968-71. Table J-1. FEDERAL OUTLAYS AND INDIVIDUALS SERVED BY PROGRAM (Outlays in millions of dollars, individuals in thousands) Outlays Program 1968 Vocational Rehabilitation Employment Service Job Opportunities in the Business Sector/On-the-job training.. Manpower Development and Training Institutional training. Neighborhood Youth Corps inschool and summer Concentrated Employment Program Work Incentive Program __ _ Job Corps Neighborhood Youth Corps out-of-school On-the-job training for veterans. Other programs3 Total 1 2 3 1969 New enrollees 1970 1971 1968 1969 l 1970 1971 c«t. 281 312 351 317 478 350 530 380 330 368 432 452 68 104 192 346 107 136 156 202 203 197 205 212 140 135 148 152 198 182 212 215 429 445 427 68 0 318 140 33 258 189 138 180 212 199 192 374 54 0 65 127 81 53 152 133 47 155 180 49 143 5 490 106 49 488 100 92 566 121 115 714 94 19 331 74 49 309 37 65 338 59 80 370 2.086 2.225 2,702 3.236 1.514 1.761 1,953 2.126 Estimated new enrollees during a fiscal year, less overlap due to persons served more than once. Enrollment not applicable. For some programs enrollment data are not applicable. 1971 LEGISLATIVE PROPOSALS The budget anticipates enactment by 1971 of three legislative proposals which will make major changes in the shape and effectiveness of manpower programs. The Manpower Training Act is directed at improving the effectiveness of many of the present manpower programs by proposing basic changes in the system for delivering services: 132 THE BUDGET FOR FISCAL YEAR 1971 • Manpower programs administered by the Department of Labor and funded under the Manpower Development and Training Act and the Economic Opportunity Act will be consolidated under one funding authority to eliminate overlap and duplication. • Categorical programs will be eliminated, and flexible funding provided, to give States and local governments more freedom in designing and operating programs tailored to the needs of each participant and responsive to local labor markets. • Responsibility for administration of manpower programs will be decentralized to the States and metropolitan areas in three stages. Each State will administer 25% of its allotment under the Act when the Governor has designated a "lead agency" and a comprehensive State manpower plan has been developed; 6 6 ^ % when a comprehensive manpower agency has been organized, and when local prime sponsors have been named in major metropolitan areas by the Governor and local heads of government; and 100% when standards of effective performance are met. • Additional resources—10% of the amount appropriated under the Act—will be "triggered" if the national unemployment rate reaches 4.5% for 3 consecutive months. This is designed to ease the impact of adjustments in the national economy on the labor force. The training programs incorporated in the Manpower Training Act will have 1971 outlays of $1.6 billion. In addition, the FederalState employment service system, with outlays of $380 million, will be an integral part of the planning and coordinating processes of the Act. Thus 61% of the total 1971 Federal manpower funds will be programed under the Act. Upon enactment of the Family Assistance Program, additional resources for manpower will also be administered through the delivery system proposed by the Act. The Family Assistance Program, in addition to reforming the welfare system, emphasizes incentives to work. AH recipients who are able to work, except mothers of preschool children, will be required to accept suitable employment or training. In order to meet this workload a substantial expansion of training and day care opportunities is planned. The incentives to encourage work and training are: • Recipients will be required to register with State employment services which will provide individually tailored plans and services to help them become self-supporting; • Recipients referred to training will receive an extra $30 per month while in training, and reimbursement for travel and other necessary expenses; • A substantial part of earnings will be disregarded in computing cash benefits for recipients already employed or employed after training. In summary, the Family Assistance Program will concentrate manpower services on those who are now dependent on income maintenance but who are able to become self-supporting if appropriate training and services are provided. Legislation has been proposed to strengthen the process for eliminating barriers to equal employment for minority groups. The Equal SPECIAL ANALYSES 133 Employment Opportunity Commission will be authorized to file civil suits in the District Courts when it is unable to obtain voluntary compliance with the Civil Rights Act of 1964. SOCIAL AND ECONOMIC OBJECTIVES OF MANPOWER PROGRAMS Manpower programs are designed to increase employment opportunities for those who are unable to obtain or maintain suitable employment and to improve the performance of the economy by increasing productivity and facilitating the movement of workers to jobs. Social objective.—Most manpower programs were initiated to serve disadvantaged persons who would otherwise be unable to obtain suitable employment. The programs fill a gap between education programs which prepare people for their careers, and income security programs which provide income for persons who are unable to work because of age, incapacity, or economic conditions. The expanding ability of manpower programs to reach the disadvantaged, and the new findings of research, experimental, and evaluation efforts make manpower programs a more important tool in attacking the Nation's social problems. While some data showing personal income and other gains from individual programs exist, the programs can not be compared on the basis of their results because similar data are not available for each program. Further data on program effectiveness are necessary in order to establish the degree to which the current mix of manpower programs is successful. Economic objective.—The use of manpower programs to complement national economic policy is inherent in the program designs. The effective operation of job placement and training programs requires that persons be placed or trained to meet skill shortages. Under tight labor market conditions, such activities reduce inflationary pressures by increasing the productivity of marginal workers and by enabling employers to obtain skilled workers who would otherwise be unavailable. During periods of high unemployment, work and training programs increase the skills of the work force and can serve as a source of income support for unemployed workers. Manpower programs can be targeted to specific geographic areas to alleviate problems resulting from national economic changes. MAJOR PROGRAM APPROACHES In this section of the analysis, programs are classified into six manpower service approaches. Some are classified entirely under one approach; others, such as the Work Incentive program (WIN) and the Concentrated Employment Program (CEP) which use multiple techniques, are split among several approaches.1 WIN provides a com1 Due to differences in appropriation patterns many outlay adjustments are made. For example, in table J-2 MDTA Institutional is increased to reflect costs budgeted under MDTA Program Services. Job Corps is reduced because program direction costs are included in its budget unlike most other manpower programs. 134 THE BUDGET FOR FISCAL YEAR 1971 prehensive range of manpower and supportive services for AFDC recipients, including referral to State employment services for training and employment. CEP concentrates a broad range of services—from testing and counseling, through work and skill training, to job placement—on a limited number of rural and urban areas of high unemployment. In the past the emphasis has been on developing approaches by which manpower goals could be achieved. Now the concern is to refine and perfect the application of these approaches. The Manpower Training Act is the chief vehicle for this reform. The Act will consolidate programs and decentralize planning and operating responsibility to State and local governments. Under the proposed reform, the classification by approach used in this analysis should continue to be a useful method for summarizing the delivery of manpower services. $ Billions Federal Outlays for Manpower Activities 1962 1963 1964 Fiscal Years 1965 1966 1967 1968 - 4 1969 1970 1971 Estimate Institutional training.—Institutional training programs provide vocational skill instruction in a classroom setting and remedial education, health, child care, and counseling services. 135 SPECIAL ANALYSES Table J-2. INSTITUTIONAL TRAINING PROGRAM LEVELS (Outlays in millions of dollars, individuals in thousands) Individuals served Outlays Program 1969 MDTA Institutional-__ Job Corps CEP Work Incentive. Other Total New enrollees Man-years 1970 1971 1969 1970 1971 1969 1970 1971 230 236 52 28 58 233 163 91 118 98 241 175 103 146 161 53 31 15 19 62 52 21 28 62 85 54 23 29 90 107 135 53 63 11 85 148 47 91 123 120 152 49 93 168 137 604 703 826 180 248 303 408 529 599 The largest of these programs, serving 152,000 people, is the Institutional Training Program conducted under authority of the Manpower Development and Training Act. In 1971, additional training opportunities are provided in skill centers and special emphasis is given to training returning veterans and persons in rural areas. In 1969 the Job Corps was reorganized and a lower program level was set. Fifty-nine less efficient centers were closed. Thirty new centers, established to serve local youths and target training to the local labor market, will be opened in 1970. Training outlays will fall to $175 million in 1971, $124 million less than in 1968. The redirected Job Corps will serve 49,000 enrollees, many of them in the 30 new community residential centers. The largest component of the Work Incentive Program and the Concentrated Employment Program is institutional training. Outlays will rise from $80 million in 1969 to $249 million in 1971, and the numbers of individuals served rise from 135,000 to 261,000. Generally, WIN and CEP purchase training services from existing community-based sources, and in this way help to strengthen the capability of communities to undertake the expanded program envisioned by the Manpower Training Act and Family Assistance Program. Other major institutional programs include manpower components of the Model Cities program, and training programs for Indians and prisoners operated by the Departments of Interior and Justice, respectively. On-the-job training (OJT).—These programs provide training for existing job vacancies, usually by reimbursing employers for the added costs of hiring and training unskilled workers. This reimbursement may cover job training costs, the cost of remedial education and other services, and a payment to the employer for the employee's lower initial productivity. 136 T H E BUDGET FOR FISCAL YEAR 1 9 7 1 Table J-3. ON-THE-JOB TRAINING PROGRAM LEVELS (Outlays in millions of dollars, individuals in thousands) Individuals served Outlays Program 1969 JOBS/OJT Veterans OJT Public Service Careers. _ Project 100,000 Other Total New enrollees Man-years 1970 1971 1969 1970 1971 1969 1970 est. 1971 est. 125 49 17 10 35 214 92 25 7 44 373 115 51 7 49 53 35 3 8 9 81 69 7 6 13 130 84 19 6 14 136 49 4 87 27 156 65 18 62 25 202 80 32 60 26 236 382 595 108 176 253 303 326 400 Outlays for these programs will increase sharply, from 11% of the Federal manpower total in 1969 to 18% in 1971, mainly as a result of contracts funded in prior years in the largest OJT program, Job Opportunities in the Business Sector (JOBS). This program, operated in conjunction with the National Alliance of Businessmen, was expanded from the 131 largest cities to a nationwide program in 1970. It was also redesigned to increase its effectiveness and to provide opportunities for upgrading the skills of persons already employed. In addition to private industry's efforts to employ and train the disadvantaged through Federal contracts, many employers will hire the disadvantaged at no cost to the Government. In 1971, as JOBS expands to become nationwide, the smaller MDTA-OJT program, which reimburses employers only for training costs, will be merged with JOBS. "National" MDTA-OJT contracts will be continued because of their unique advantages for involving unions and trade associations. Veterans OJT is provided by the Veterans Administration to former servicemen whose education or training was interrupted by military service. Participants receive a stipend when pursuing an approved course of full-time apprenticeship or other on-the-job training. The program is growing rapidly because of the rising numbers of returning Vietnam veterans. The experience of JOBS with private employers prompted a new initiative in 1970, the Public Service Careers (PSC) program. PSC will increase the hiring and training of disadvantaged persons for regular positions in Federal, State, and local governments by providing reimbursement for training and related costs. Outlays of $51 million in 1971, the first full year of PSC, will permit 32,000 individuals to participate. Project lOOfiOO, operated by the Armed Services, will in 1971 lower entrance standards for about 60,000 recruits, and provide them with special supportive services so that they can meet military standards. Rehabilitation.—Rehabilitation programs assist physically or mentally disabled persons to be restored to productive lives. They provide diagnosis, counseling, medical restoration, and vocational training, 137 SPECIAL ANALYSES which are supplementary to income and services received by the disabled from family income, workmen's compensation and disability and medical insurance. Table J-4. REHABILITATION PROGRAM LEVELS (Outlays in millions of dollars, individuals in thousands) Iindividuals served Outlays 1Wan-years Program Vocational Rehabilitation Veterans Vocational Rehabilitation _ Total .__. New enrollees 1969 1970 367 499 553 463 501 561 368 432 452 40 52 55 9 12 12 14 17 17 407 551 608 472 513 573 382 449 469 1971 1969 1970 1971 1969 1970 1971 est. Under the Federal-State Vocational Rehabilitation program, the largest single manpower program, clients are prepared for competitive employment, homemaking, or sheltered employment. State rehabilitation agencies determine client needs and purchase services on a caseby-case basis. Outlays increased by $132 million in 1970 partially as a result of increasing the Federal matching rate from 75% to 80%. It is estimated that 288,000 individuals will be rehabilitated under this program in 1971. A heavy emphasis will be given in 1971 to assisting the culturally and socially disadvantaged, especially public assistance recipients and criminal offenders. The 1968 amendments to the Vocational Rehabilitation Act provided greater flexibility in serving disabled persons. Important changes include authority for extended evaluation of persons whose severity of disability previously precluded consideration; provision of services to members of the family to achieve the rehabilitation of a disabled person; and provision of other facilities and services which may be expected to contribute substantially to the rehabilitation of a group of handicapped individuals. The Veterans Vocational Rehabilitation program provides similar services to persons who suffered a service-connected disability. The services are funded and administered by the Veterans Administration. In addition to counseling and training, the veteran receives a subsistence allowance, disability compensation, tuition, books, and fees. Work support.—Work support programs create temporary jobs, usually in the public sector, which terminate when the Federal subsidy ends. The programs provide the unemployed with work skills and work habits, offer enrollees an opportunity to stay in school, or provide enrollees with wages for useful work. Seventy percent of program costs is in the form of enrollee wages for work by persons who otherwise would be unemployed. 138 T H E BUDGET FOR FISCAL YEAR 1971 Table J-5. WORK SUPPORT PROGRAM LEVELS (Outlays in million, of dollars, individual, in thousands) Individuals served Outlays Program Man-years 1969 actual N Y C in-school summer Other 1970 1971 1969 1970 est. New enrollees 1971 est. 1969 actual 1970 est. 1971 est. and Subtotal, in-school N Y C out-of-school __ CEP Mainstream _ Other Total 182 65 212 71 215 68 150 34 157 32 160 32 429 93 445 102 427 102 247 106 56 37 35 284 100 59 41 18 283 121 67 41 26 184 44 10 10 21 189 34 18 12 7 192 34 18 13 16 522 74 44 11 17 547 37 42 11 13 529 59 43 9 18 481 502 538 269 260 273 669 650 658 The largest work support effort is the Neighborhood Youth Corps in-school and summer programs which offer work to needy high school students. Unlike other manpower programs, which provide remedial services for those who have left school, these programs are primarily preventative—to keep youth in school, and to aid the transition from school to work. Funds have been reprogramed in 1970 to permit about the same number of youths to participate in the summer of 1970 as in the summer of 1969. The Neighborhood Youth Corps out-qf-school program offers work experience and related services to poor out-of-school youths. This, the largest manpower program offering year-round employment, has been redesigned in 1970 to stress counseling, basic education, and other services needed to enable 59,000 enrollees to return to school, to enter other training programs, or to obtain regular employment. Operation Mainstream provides employment opportunities to older workers in rural areas where employment opportunities are limited. An estimated 9,000 individuals will be served in 1971. In addition, CEP provides significant amounts of work support as part of its array of services. Job placement assistance.—These programs promote a smoothly operating labor market by assisting employers to find qualified workers, and by overcoming barriers created by job discrimination and workers' lack of knowledge. They develop and disseminate information on employer and employee needs, and counsel and test job seekers. Other services include "outreach" to find unemployed people, and job development and job restructuring efforts with employers. 139 SPECIAL ANALYSES Table J-6. JOB PLACEMENT ASSISTANCE PROGRAM LEVELS (Outlays in millions of dollars) Outlays Program Employment Service Project Transition Equal Employment Opportunity Commission Other Total 1969 actual 1970 estimate 1971 estimate 298 14 9 33 332 15 13 50 366 14 18 91 354 410 489 The Federal-State Employment Service (ES), operated by the States, accounts for 75% of 1971 outlays in this category. The ES, with 2,100 local offices and 41,000 employees, provides not only placement services for the general work force, but also makes special efforts to place the disadvantaged, including those served by other manpower programs. Up to 11 million persons are expected to receive such services in 1971. A new development assisting job placement efforts is computerized Job Banks, which will be installed in 81 cities by 1971. More automated job matching systems are being tested in 14 States. Project Transition provides counseling, testing, limited skill training, and job placement assistance to servicemen prior to discharge. The Defense Department will spend about $14 million on this program in 1971 for about one-third of a million servicemen. In 1971, outlays by the Equal Employment Opportunity Commission will increase by $9 million over 1969, a 100% increase. The Commission attempts to reduce barriers to employment of minority groups and others by investigating and conciliating complaints of discrimination. The Office of Federal Contract Compliance, working in conjunction with the 15 major Federal contracting agencies, will increase its surveillance of the employment practices of Federal contractors. In order to increase minority group employment in the construction trades, it has devised the "Philadelphia Plan" which sets employment goals for Federal construction projects. Manpower research and development.—As part of the effort to improve program performance, more emphasis will be given to research and development (R. & D.) related to manpower programs. Outlays will rise 30% between 1970 and 1971. Table J-7 summarizes the Federal resources for manpower R. & D., largely from the Department of Labor and the Office of Economic Opportunity. In addition, other agencies carry out R. & D. activities affecting manpower, especially the Department of Defense, and the Social and Rehabilitation Service and the National Institutes of Health of the Department of Health, Education, and Welfare. 140 THE BUDGET FOR FISCAL YEAR 1971 Table J-7. PROGRAM DIRECTION, RESEARCH AND SUPPORT PROGRAM LEVELS * (in millions of dollars) Outlays Program 1969 actual Experimental and Demonstration Research Evaluation 1971 estimate 21 5 4 25 6 5 34 7 7 31 36 47 73 30 10 75 32 11 36 19 Subtotal, Program Direction and Support 113 117 133 Total 143 153 180 Subtotal, Research and Development Program Direction Labor Market Information Technical Assistance 1 1970 estimate n These programs do not include enrollments, except relatively small numbers in E. & D. projects. Experimental and demonstration programs develop or demonstrate new service techniques in an operational setting. Substantial increases are proposed in these activities for 1971. The Office of Economic Opportunity, as the principal innovative arm for the Government's social programs, will receive the bulk of this increase. One new approach being tested will provide vouchers to unemployed job seekers in certain States and communities to enable them to purchase the training or work experience of their choice. Research activities are designed to develop or discover new knowledge in a nonoperational setting. The research program administered by the Department of Labor includes support of Ph. D. dissertations, grants to established researchers, and support of five university-based, interdisciplinary research centers. In 1970 and 1971 increases are provided for behavioral research focusing on such topics as the attitudes of the disadvantaged to the world of work. Evaluation activities seek to determine what works, to what extent, and under what conditions. Most evaluation efforts have been on-site reviews to indentify critical operating problems. This reflected the rapid buildup of manpower programs during the past decade with consequent implementation problems. Recently, the evaluation effort has shifted to include fundamental and broad assessment of program effectiveness. A major study initiated in 1969 is a longitudinal assessment of the graduates of six programs serving disadvantaged youths. Results of this study will begin to be available within the next year. Similar studies have been launched, or will be shortly, on the Work Incentive and Public Service Careers programs, and MDTA skill centers. Program direction.—The effectiveness of individual programs depends both on national program administration and on the delivery of services at the local level. To improve national program administration, several recent steps have been taken: 141 SPECIAL ANALYSES • The Manpower Administration was reorganized to centralize responsibility for manpower programs in a new organization— the U.S. Training and Employment Service. • The Job Corps was delegated from OEO to the Department of Labor so it could be better integrated with other manpower programs. • Nearly every major manpower program was reexamined and new operating procedures instituted to improve operating effectiveness. • In accord with the overall government effort, greater authority and responsibility was delegated to the Regional Manpower Administrators. The 1971 program anticipates increased resources for technical assistance to State and local governments in the operation of manpower programs. In addition, increases are provided for the collection of more labor market information, including data on local job opportunities, to assist in community manpower planning and execution. In 1971, outlays for these purposes will be $133 million. PEOPLE SERVED Man-years of training and new enrollments are the program impact measures used in this analysis. Man-years is the average enrollment during the year and is the best measure to compare program levels among programs. New enrollments is the number of different people served during each fiscal year. In a few programs, e.g., NYC inschool and summer, a significant number of people enroll in more than one program within a single year, or in the same program several years in succession. In these cases this analysis uses a net figure which deducts the overlap. In some programs man-year data include periods where no significant amount of services are provided, e.g., persons awaiting services in the Concentrated Employment Program, and the analysis uses a man-years of service estimate to account for this. Table J-8. AGGREGATE ENROLLMENT LEVELS IN MANPOWER PROGRAMS i (in thousands) Measure 1968 actual 1969 actual 1970 estimate 1971 estimate Enrollment beginning of year New enrollments during the year Enrollees terminating during the year. Enrollment end of year 950 1,650 1,550 1,050 1,050 1,900 1,600 1,350 1,350 2,100 1,850 1,600 1,600 2,300 2,100 1,800 Man-years (average enrollment) 1,000 1,150 1,350 1,550 New enrollment (less overlap) Man-years of service 1,500 950 1,750 1,050 1,950 1,200 2,150 1,400 1 Excludes Job Placement Assistance programs for which the concept of enrollment does not ajpply. All enrollment numbers rounded to nearest 50,000. In 1971, average enrollment will increase by 14% over 1970. JOBS, WIN, and Vocational Rehabilitation account for 78% of this increase. 142 THE BUDGET FOR FISCAL YEAR 19 7,1 Characteristics.—The 10.9 million adults who were poor in 1968, of whom about half were working but earning less than a povertywage, is a rough representation of the universe of need for manpower programs. The universe actually may be considerably larger, since many earn little more than the poverty standard and are vulnerable to skill obsolescence and unemployment. However, many poor adults are not candidates for manpower services because of health, age, and conflicting family responsibilities. The focus of most Federal manpower programs on the poverty universe reflects the judgment that persons with severe employment handicaps are least likely to be able to improve their employment experience without assistance. For example, all of the manpower programs administered by the Department of Labor emphasize services to poor persons who are not suitably employed and who are either (1) school dropouts, (2) under 22 years of age, (3) 45 years of age or over, (4) handicapped, or (5) subject to special employment obstacles. This focus avoids displacement of private efforts which are generally targeted at different groups. The number of individuals served by manpower programs is a growing proportion of the poverty population. In 1968 manpower programs served about 7 % of the 10.9 million poor. By 1971 it is estimated that a larger percentage of the poor will be served as average enrollment rises over 50% from 1968. The role of manpower programs in serving the disadvantaged is illustrated in the table below: Table J-9. ESTIMATED CHARACTERISTICS OF CIVILIAN LABOR FORCE, ADULT POVERTY POPULATION, AND MANPOWER PROGRAM PARTICIPANTS Characteristics Average number (millions) Percent: Aged 21 or less Aged 55 or more Male ._ .... Less than high school education 8th grade education or less Poor Welfare recipients Disabled Total U.S. work force 1968 (age 16-64). civilian, noninstitutional 75.6 14 14 63 39 20 7 1 Poverty population 1968 (age 16-64), ~*~'ilir ~ institutional Manpower, programs, participants 1969 (a 14 and above) 1 10.9 19 19 39 69 50 100 22 Minority races 1 2 1.2 40 7 60 62 17 73 21 38 42 All entries are estimates. Excludes Job Placement Assistance and In-School programs. Not available. Table J-9 indicates that manpower programs are meeting their intended targets: the poor, the less educated, members of minorities, youth, and welfare recipients. Older persons are a small part of the population served since employment is often less appropriate than income support. As indicated in table J-10 below, the characteristics of enrollees served by different approaches vary considerably. 143 SPECIAL ANALYSES Table J-10. ESTIMATED CHARACTERISTICS OF ENROLLEES BY APPROACH IN 1969 (in percent) Approach OJT _ Institutional training Rehabilitation Post-school work support Subtotal post-school In-school work support Total Poor __ Less than Minority high races school education Aged 21 or less Male Welfare recipient Disabled 51 81 70 95 53 67 56 85 45 57 22 53 47 43 24 65 79 55 56 51 9 34 11 38 3 7 100 2 73 100 62 97 42 58 40 100 60 54 21 31 38 0 83 75 48 63 58 25 24 In 1969, OJT enrollees were among the least disadvantaged because the OJT programs enrolled those most job-ready. In 1971, this distribution is expected to change because of the growth of the JOBS program which reaches the "hard core" disadvantaged. Institutional programs serve high proportions of welfare clients and educationally disadvantaged and will reach even more disadvantaged clients in 1971 with the growth of the WIN program. Most disabled persons are served by rehabilitation programs specifically targeted to their needs. The work support programs focus on the most disadvantaged groups and provide a source of income for those who have no immediate prospects for regular jobs. SERVICES PROVIDED Each major program approach provides a substantially different mix of services, as shown in Table J—11. Table J—11. ESTIMATED DISTRIBUTION OF COSTS BY APPROACH IN 1969 (in percent) Approach Service Institutional OJT Remedial education _ Skill training _ __ Work supervision. __ Child care _. Health Recruitment, counseling, and placement. Program administration Other supportive services 2 Allowances.- __ TotaL l Work support Rehabilitation Job placement assistance 2 22 1 * 1 11 9 20 34 9 25 * 2 2 9 15 4 35 1 * 11 * * 4 11 2 70 0 5 0 0 19 28 7 27 15 1 1 1 2 * 70 22 3 * 100 100 100 100 100 *Less than 0.5%. 1 Excludes Federal Program Direction, Research, and Experimentation. Includes State and local shares. 2 Includes payments to employers to compensate for lower productivity of trainees and amounts which could not be allocated to other services. 144 THE BUDGET FOR FISCAL YEAR 1971 Most OJT programs reimburse employers (who provide training and other supportive services), although a few programs provide allowances and other services directly to enrollees. The institutional programs focus on remedial education and skill training. Work support programs emphasize payment of allowances for work performed, and work supervision. The job placement assistance programs provide counseling, placement, and such services as child care to allow parents to work. Overall, allowances are the largest part of manpower costs, reflecting the need of enrollees for income support while participating in training. Although a comprehensive array of services is provided in total, the actual services available to each enrollee are often limited to those of the particular program in which he participates. For example, in 1971 over 77% of the child care is provided for WIN enrollees, even though WIN accounts for only 18% of all post-school women enrolled. Consolidation and coordination of programs under the Manpower Training Act will better enable enrollees to receive the services which are most appropriate to their needs. In addition to the great variance in services provided by program and approach, there are significant differences in overall unit costs. Table J-12. ESTIMATED MAN-YEAR AND PARTICIPANT UNIT COSTS BY APPROACHi Approach OJT Institutional training Rehabilitation Post-school work support Subtotal post-school In-school work support Total 1969 man-year unit cost estimate 1971 Man-year unit cost estimate Average duration of enrollment (years) Participant unit cost estimate $2,200 3,500 1,150 3,150 $2,400 3,150 1,300 3,550 .56 .57 1.16 .52 $1,350 1,800 1,500 1,850 1,900 1,550 2,150 1,700 .74 .25 1,600 450 1,900 2,100 .59 1,200 i Based on man-years of service. Includes State and local share, if any. All dollar amounts rounded to nearest 50. In 1969 unit costs are highest for institutional training programs, reflecting the intensive services provided to participants. By 1971, the Job Corps decrease and redirection, and the growth of other less costly programs, will considerably reduce unit costs. Both man-year and participant costs are lowest for in-school programs, because they are part time or of short duration. OJT costs are also low because the employers' payment of salary avoids the need for allowances in most cases. However, OJT costs are rising due to the more intensive level of services provided by the JOBS program. Unit costs for post-school work support will rise substantially because of the new NYC out-ofschool program with its enriched educational services. In all cases 145 SPECIAL ANALYSES except Rehabilitation, the participant unit cost is lower than the manyear cost because the duration of enrollment is less than one year. In all approaches, unit costs vary widely among individual programs reflecting the intensity of services. For example, Job Corps and Vocational Rehabilitation provide a wider range of services than most other programs. However, a larger part of the variance is due to other factors. The Work Incentive program, for example, pays lower allowances than most programs because enrollees are already receiving welfare payments. Project 100,000 has a low-unit cost because only incremental training costs over normal military training are attributed to the program. MANPOWER FUNDS BY AGENCY The following table shows manpower obligations and outlays by agency, appropriation, and functional code. Three agencies—Labor, OEO, and HEW—account for 89% of all manpower outlays in 1970. With the proposed transfer of OEO manpower programs to the Department of Labor under the Manpower Training Act, Labor and HEW alone will account for 81% in 1971. Table J-13. MANPOWER FUNDS BY AGENCY, APPROPRIATION FUNCTION (in millions of dollars) Agency and appropriation Office of Economic Opportunity: Economic Opportunity Act Economic Opportunity Act Manpower Training Act transfer Functional code 604 551 604 Subtotal, OEO Department of Defense: Military Personnel: Army, Navy, Marine Corps, and Air Force. _ 051 Operation and Maintenance: Army, Navy, Marine Corps, and Air Force.. 051 Research, Development, Test, and Evaluation, Army.. . . . . . . 051 Subtotal, HEW See footnote at end of table. Obligations Outlays 1969 1970 1971 1969 1970 1971 780 32 811 37 881 48 -689 882 36 778 50 802 66 -622 812 848 240 918 828 246 8 8 8 8 8 8 16 14 13 16 14 13 * * * 24 22 20 24 22 20 603 703 604 703 703 701 4 351 33 38 16 530 199 75 9 22 371 115 40 16 10 478 138 55 6 20 17 14 499 130 58 9 20 24 539 170 78 10 22 701 1 2 2 1 2 2 443 708 852 542 731 844 Subtotal, Defense Department of Health, Education, and Welfare: Vocational Education Rehabilitation Services and Facilities Work Incentives Grants to States for Public Assistance Programs for the Aging Federal Disability Insurance Trust Fund Federal Old-Age and Survivors Insurance Trust Fund . AND 146 THE BUDGET FOR FISCAL YEAR 1971 Table J-13. MANPOWER FUNDS BY AGENCY, APPROPRIATION AND FUNCTION (in millions of dollars)—Continued Functional code ! Agency and appropriation Department of Housing and Urban Development: Model Cities programs. Community Development Training V>1 554 Subtotal HUD Outlays Obligation 5 1969 1970 1971 1969 1970 * 18 1 38 2 14 * 38 1 40 1 * 19 40 14 40 42 1971 Department of the Interior: Education and Welfare Services 601 24 38 41 24 38 41 Department of Justice: Federal Prison Industries Fund 908 2 3 4 2 3 4 Department of Labor: Manpower Development and Training Activities. Manpower Administration, S. & E Bureau of Apprenticeship and Training, S. & E-_ Bureau of Employment Security, S. & E__ ___ Grants to States for Employment Security Wage and Labor Standards, S. & E Bureau of Labor Statistics, S. & E Federal Contract Compliance and Civil Rights— Manpower Training Act 604 609 604 609 609 609 609 609 604 374 32 9 18 318 412 40 8 18 350 608 62 7 401 30 9 19 317 672 40 7 16 350 748 61 7 8 * 8 1 9 1 9 1 760 Subtotal, Labor Veterans Administration: ComDensation and Pensions Readjustment Benefits General Operating Expenses Subtotal, VA 801 802 809 - _ Equal Employment Opportunity Commission: Equal Employment Opportunity Commission, S. & E All Federal agencies—Disadvantaged Programs Total *Less than $500 thousand. Youth 609 380 1 9 380 2 10 714 667 838 1,781 786 1,096 1,873 20 56 13 27 103 15 29 127 16 20 60 13 27 104 15 29 126 16 90 145 172 94 146 171 9 13 18 9 13 19 61 68 68 61 68 68 2,225 2,701 3,236 2,474 2,984 3.329 SPECIAL ANALYSIS K FEDERAL HEALTH PROGRAMS 1 General overview.—Federal outlays for health are estimated at $20.6 billion in 1971, an increase of $1.8 billion over the 1970 level. As indicated in table K - l , Federal spending for health in 1971 will rise to 10.5% of Federal outlays for all purposes and will continue to account for more than one-fourth of all public and private expenditures for health. The higher share of Federal health outlays beginning in 1967 reflects the enactment of Medicare and Medicaid, through which the Federal Government assumed responsibility for a significant portion of the health care needs of the aged and the poor. Table K-1. TOTAL FEDERAL OUTLAYS, FEDERAL OUTLAYS FOR HEALTH, AND TOTAL NATIONAL EXPENDITURES FOR HEALTH i (dollars in billions) I960 1965 1967 1968 1969 1970 1971 Total Federal Outlays.. $92.2 $118.4 $158.4 $178.9 $184.6 $197.9 $200.8 Federal Outlays for Health _ $5.2 $10.8 $14.1 $16.6 $18.8 $20.6 $3.5 Federal Health outlays as percent of 10.5 total Federal outlays 7.9 8.2 4.4 6.2 3.8 10.0 Total National Health Expenditures $26.4 $38.9 $48.2 $53.9 $60.3 NA NA Federal Health outlays as percent of to28 13 13 22 26 tal National Health expenditures 1 Historical data on total public and private health expenditures shown in table K-1, are published by the Department of Health, Education, and Welfare in the Social Security Bulletin. The HEW tabulation estimates lower Federal outlays than in this analysis, primarily because it excludes outlays for medical training and education, Federal agency contributions for employee health programs, Department of State, and AID expenditures for overseas health programs and the Department of Agriculture's outlays for meat and poultry inspection. Within the more restricted HEW definition Federal outlays were 11% of the total in 1960 and rose to 25% in 1969. NA=Not available. Table K-2 distributes Federal health outlays by program categories for the years 1969-71. The major factor in the yearly increase continues to be Medicare and Medicaid, both 77of which are included in "Provision of hospital and medical services. Outlays from these two programs account for $11.6 billion and 83% of the total $1.8 billion increase over 1970. In 1965, only 19% of Federal outlays for health was directed towards financing personal health care for the general population. By 1967, this proportion had risen to 48%, and in 1971, 147 148 THE BUDGET FOR FISCAL YEAR 1971 total outlays for this purpose are expected to equal $13 billion, or 63% of all Federal expenditures for health. Table K-2. FEDERAL OUTLAYS FOR MEDICAL AND HEALTH-RELATED ACTIVITIES BY CATEGORY (in millions of dollars) 1969 Development of health resources, total Health research Training and education Construction of hospitals and health facilities Improving the organization and delivery of health services Provision of hospital and medical services, total Direct Federal hospital and medical servicesHospital and medical services, indirect Prevention and control of health problems, total Disease prevention and control Environmental control Consumer protection Total outlays from Federal and trust funds. _- _ 1970 1971 3,111 3,498 3,640 1,528 805 612 166 1,622 951 705 220 1,660 1,033 712 235 12,794 14,486 16,096 2,860 9,934 3,147 11,339 3,116 12,980 651 803 866 411 86 154 489 134 181 504 163 199 16,556 18,787 20,602 The large and relatively uncontrollable increases in Medicare and Medicaid tend to obscure other important directions reflected in the 1971 budget proposed by the administration. Excluding these programs, Federal health outlays rise from $8,637 million in 1970 to an estimated $8,972 million in 1971. Highlights of these increases, discussed in the appropriate sections below, will: • • • • • • • 1971 increase (dollars in millions) Increase the supply of trained health manpower, principally via programs in HEW, VA, Defense, and Labor 82 Increase the construction of facilities providing care to ambulatory patients, thereby offering less expensive, but medically appropriate alternatives to hospitalization, primarily through HEW programs 18 Increase the attack on air pollution and other environmental factors principally via HEW, Agriculture, DOT and Interior programs 52 Increase family planning services and research, domestically through OEO and HEW programs, and overseas through AID programs 93 Improve the efficiency of the Nation's organization and delivery of health services through HEW, VA and OEO programs 29 Increase services offered through special and comprehensive centers for mothers and children, the poor, and the mentally ill including narcotics and alcoholics, through programs in HEW and OEO 60 Increase HEW's biomedical research, particularly in cancer, heart and lung disease and tooth decay, to exploit recent breakthroughs in our knowledge 38 Because of the time lag, a significant part of the increase in program level for ambulatory care facilities and biomedical research provided in the 1971 budget, will not be reflected in higher outlays until 1972. SPECIAL 149 ANALYSES DEVELOPMENT OF HEALTH RESOURCES Federal programs aimed at enlarging the health resources of the Nation include health research, health manpower training and education, construction of medical and health facilities, and efforts directed toward improving the organization and delivery of health services. The combined outlays for these programs will rise to almost $3.6 billion in 1971. Health research.—Thirteen Federal agencies are engaged in the support of health research aimed at the solution of a range of problems from the prevention and cure of human diseases and of plant and animal diseases related to human health, to insuring the health of our astronauts in space. These agencies will spend $1,660 million for mission-related health research in 1971, an increase of $38 million over 1970, and $132 million over 1969 (see tables K-14 through K-16). The Federal Government currently provides about 60% of all funds spent in the United States for health research, with industry contributing 28%, and foundations, voluntary health agencies, and others contributing 11%. Federal health research funds are spent largely in the Nation's medical schools, universities, and other nonprofit institutions, accounting for about 63% of Federal health research expenditures. Federal laboratories and clinics account for 25%, with about 12% going for support of research conducted by industry and others. Some of the purposes for which Federal health research funds are spent are indicated in table K-3. The Department of Health, Education, and Welfare, will account for 72% of total Federal health research expenditures in 1971. Because the health role of HEW represents the broadest mandate to protect and improve the health of the American people, the health research supported by HEW spans a broad spectrum of inquiry ranging from research aimed at the solution of specific health problems (such as cancer, heart disease, mental illness, and the purity of our food, drugs, and environment), to basic biomedical research aimed at increasing our understanding of the biological, physical, mental, and environmental factors which affect life processes. Table K-3. FEDERAL OUTLAYS FOR HEALTH RESEARCH (in millions of dollars) 1969 actual Basic research Categorical research and development Cancer Cardiovascular Mental health Neurological and visual Population and family planning Environmental health Other categorical research and development Research facilities construction Research, total 1970 estimate 562 903 (170) (142) (76) (88) (54) (87) (286) 62 583 971 (166) (143) (85) (87) (67) (112) (311) 67 1,528 1,622 1971 estimate 569 1,035 (182) (155) (88) (86) (72) (135) (3,7) 1,660 150 THE BUDGET FOR FISCAL YEAR 1971 In 1971, HEW health research increases will be concentrated on high priority health problems and on exploiting new research leads which provide clues to the prevention or control of certain diseases. Research on viruses implicated as the cause of cancer will be significantly expanded, as will research on the relationship of heart disease and risk factors associated with the incidence of cardiovascular disease. Research aimed at eliminating the cause of dental caries will be increased along with greater support for research on pulmonary diseases. High priority has been accorded efforts to eliminate diseases and disabilities affecting infants and children. Research on these problems and on the development of safe and effective means of contraception will be increased markedly. Consistent with intensified efforts to improve our environment, research on the biological action of environmental pollutants will be increased. Support for research on the mental and social problems of drug abuse and alcoholism will also increase in 1971. The health research supported by the Veterans Administration has as its focus service-connected disabilities or diseases, and the medical problems of aging veterans, with particular emphasis on mental illness, dental diseases and clinical pharmacology. DOD research, which is directed towards the care and rehabilitation of war casualties, plus VA research support, will equal 9% of total Federal outlays for health research in 1971. The National Aeronautics and Space Administration supports a health research component directed toward insuring the health of astronauts in space. The 1971 program will also support environmental health research on the control of noise pollution from aircraft, and the use of aerial and satellite mapping of sources of pollution, erosion, and other ecological problems. The Atomic Energy Commission, concerned with the health implications of nuclear energy, will continue its research on the interaction of radiation with living matter. This research will focus on three areas: understanding the biological effects of radiation; protecting man from exposure to radiation; and the utilization of radiation to help in the solution of health problems, such as the treatment of cancer and the development of radioisotope tracers for use in biomedical experimentation. In addition, collaboration between HEW and AEC scientists has resulted in improved techniques for separating viruses for use in the production of vaccines of higher purity and with fewer adverse side effects. The health research supported by the Department of Agriculture is focused largely on the consequences of diseases affecting animal and vegetable products. Research is also conducted on the role of insects as carriers of disease in efforts to develop prevention and control methods. The Agency for International Development will concentrate its research activities on new means of fertility control and new approaches to the control and eradication of epidemic and endemic diseases in less developed countries. Other health research activities include basic research in biology and biochemistry supported by the National Science Foundation. SPECIAL 151 ANALYSES Training and education.—One of the factors contributing to the present inability of the health care system to meet the demand for health services is the shortage of trained individuals to deliver these services. For the past 20 years, Federal support for medical school programs concentrated on biomedical research which has grown from under $100 million in 1950 to over $1,600 million in 1970. While indirectly assisting the education of medical students, the expenditure of these funds in medical schools was almost exclusively for research projects and research training programs. These funds have enabled medical schools to increase their full-time faculty to 20,500 in 1970, a 422% increase over 1950, and the number of pre- and post-doctoral (largely research) students to 17,000, a 208% increase over 1950. Over the same period, the number of interns and residents in Medical school programs increased by 280%, to nearly 23,000. The number of medical students, however, had increased by only 42%, to an estimated 37,200. In order to increase the supply of physicians and other health service manpower, the Federal Government in recent years has undertaken direct efforts to stimulate the training of more health professional and paramedical personnel. These efforts have concentrated on expanding the enrollments of health professions schools through construction, institutional, and student aid; on increasing the numbers and types of paramedical personnel; and on increased use of Federal facilities to provide training for all types of health personnel. Ten Federal agencies are engaged directly in the support of education programs to train medical, dental, nursing, paramedical, and other health professional personnel. The number of health professionals who will be aided for some part of their education by Federal agencies in 1971 is indicated in table K-4. Table K-4 FEDERAL AGENCIES SUPPORTING HEALTH MANPOWER TRAINING IN 1971 Students and trainees Physicians l Department of Health, Education, and Welfare_____ Veterans Administration Department of Labor Department of Defense Office of Economic Opportunity Other agenci es 1 2 Dentists Nurses Other professionals 2 19,144 17,400 15,670 1,200 40,713 22,000 17,825 4,425 3,083 2,930 74 481 232 2,495 995 424 1,028 Paramedicals 515 4,679 14,220 6,797 3,387 419 Includes medical students, interns and residents. Includes pharmacists, optometrists, podiatrists, veterinarians, etc. The Department of Health, Education, and Welfare, principally through the health manpower programs of the National Institutes of Health, supports the training of the largest number of physicians, dentists, nurses, and other health professionals. In 1970, HEW initiated the Physician Augmentation Program to enroll 1,000 medical 152 THE BUDGET FOR FISCAL YEAR 1971 students in addition to the increase originally planned by medical schools. In 1971, as in 1970, the HEW program of direct loans and scholarships for health professions students will be concentrated on assisting students from income backgrounds under $10,000. The Veterans Administration, through its 166 hospitals, most of which are associated with medical schools, trains large numbers of all types of health manpower for its own and the Nation's health care system. The Department of Labor, through the Manpower Development Training Act, supports the training of the greatest number of paramedical personnel of any Federal agency, followed by the Defense Department. In 1971, Federal outlays for health training and education will rise to $1,033 million, an increase of $82 million over 1970 and $228 million over 1969. These outlays, by type of professional training supported and by type of training space constructed, are distributed as shown in table K-5. Included in the expenditures under "all other training" is support for short-term training of nurses and paramedical personnel and continuing education programs for physicians. Table K-5. FEDERAL SUPPORT FOR HEALTH TRAINING Outlays (in mi! lions of dollars) 1969 Physicians: Training School construction _ Dentists: Training School construction Nurses: Training School construction _ Other health professions: Training School construction _ _ Paramedical training Research training _ _ All other training Total 1 ___ _ 1970 First-year spaces addedi 1971 1969 1970 1971 176 61 203 96 241 97 284 343 443 30 12 36 24 50 27 61 242 177 62 11 67 13 70 23 1,174 500 500 8] 4 62 205 101 98 11 65 218 120 105 13 71 214 122 247 290 147 805 951 1,033 Numbers reflect results of obligations in given year. Construction of health care facilities.—Federal outlays are estimated at $712 million in 1971, compared to $705 million in 1970. These expenditures will be used to build or modernize health care facilities operated by Federal agencies for their own beneficiaries, or to support construction of community facilities to serve the general population. Federal outlays accounted for approximately 15% of the $2.4 billion total national expenditures for health facility construction in 1969. The Federal Government will spend $153 million in 1971 for construction of its own hospitals and health facilities, primarily those operated by the VA, the Department of Defense, and the Department SPECIAL ANALYSES 153 of Health, Education, and Welfare. These expenditures will concentrate on modernizing existing facilities to increase operating efficiency, adjust to the changing needs of beneficiaries, and adapt to improve medical technology. As another means of improving the effectiveness of the Nation's medical delivery system, the VA and HEW are considering common construction so that a single facility can serve beneficiaries of both systems. The largest Federal program to support construction of communityoperated health facilities is the Medical Facilities Construction (Hill-Burton) program of the Department of HEW. From its enactment in 1946 through 1970, the Hill-Burton program approved construction or modernization of about 467,000 hospital and long-term care beds costing about $12 billion, of which $3.7 billion represents the Federal share. Through Hill-Burton grants, national shortages of hospital beds have been virtually eliminated. Now, however, new conditions and changing needs make sole reliance on grant programs or emphasis on additional hospital beds inappropriate. With medical price increases and the inability of the health system to deliver services effectively, there is growing recognition of the need to develop ambulatory care facilities (hospital outpatient departments, clinics, and community centers), particularly where they can serve as more efficient and economical alternatives to hospital care. In addition, the growth of third party payments (e.g., private insurance, Medicare and Medicaid) to cover the costs, including depreciation, of hospital and skilled nursing home care, has improved the ability of these institutions to finance needed capital improvements through borrowing. Based on these factors, the 1971 budget reflects a major program shift in the medical facilities construction program: directing grants toward ambulatory care facilities; relying upon guaranteed loans with interest subsidies for construction and modernization of private nonprofit hospitals and long-term care facilities; and providing direct loans for public institutions. A comparison of actual budget authority in 1969 with the 1971 budget request emphasizes the program shift. Grants for construction of hospitals and skilled nursing homes were $228 million in 1969 and are replaced in the 1971 budget by $500 million in loan guarantee authorizations and $30 million in direct loans. Grants for ambulatory care facilities rise from $18 million in 1969 to $40 million in the 1971 budget. It is estimated that the mortgage guarantee and direct loan programs will construct or modernize 8,400 hospital beds while the grant program will support 140 ambulatory care facilities. Other Federal programs also help supply funds for construction of community health facilities. The Department of Housing and Urban Development provides grants for sanitation facilities, loans to smaller communities to construct essential health facilities, and mortgage insurance (but without an interest subsidy) for construction of hospitals, nursing homes and group practice facilities. It is estimated that the volume of mortgage insurance commitments in 1971 by HUD will total $255 million, an increase of $96 million over 1970, which will construct or modernize over 1,000 hospital beds and 16,820 proprietary and nonprofit long-term care beds. HEW grants available for the construction of community mental health centers have assisted 154 THE BUDGET FOR FISCAL YEAR 1 9 7 1 in the construction of 376 centers from 1965 through 1969. An estimated 97 centers will be built in 1970 and 1971. Table K-6 shows health facility construction trends for 1969-71. Table K--6. HOSPITAL A N D HEALTH FACILITY CONSTRUCTION Outlays (in millions of dollars) 1969 Federal hospitals and health facilities: Hospitals, new, modernized and replaced. Long-term care facilities. _ Ambulatory care facilities Environmental health facilities Other health facilities Federally supported construction of hospitals and health facilities: Hospitals, new, modernized and replaced. Long-term care facilities Ambulatory care facilities Environmental health facilities Other health facilities Total 1970 1971 Volume of loan guaranteed commitments 1969 1970 1971 99 126 19 18 11 5 20 7 110 1 3 26 14 174 74 75 130 13 191 86 93 157 19 174 90 97 182 16 28 113 5 23 113 24 184 185 53 612 705 712 146 160 422 Organization and delivery of health services.—In their "Re- port on the Health of the Nation's Health Care System/' on July 10, 1969, HEW Secretary Robert Finch and Assistant Secretary Roger Egeberg said: "Expansion of private and public financing for health services has created a demand for services far in excess of the capacity of our health system to respond. The result is a crippling inflation in medical costs causing vast increases in Government health expenditures for little return, raising private health insurance premiums and reducing the purchasing power of health dollars of our citizens." The 1971 budget mounts a concerted effort to alleviate these problems, through programs to expand manpower, construct ambulatory care facilities, and fund comprehensive health centers. Besides these efforts, the 1971 budget estimates outlays of $213 million, an increase of $29 million over 1970 for domestic programs which are oriented toward experimental approaches and innovative concepts in the delivery of health care. In addition, the Agency for International Development will expend $22 million for similar programs overseas. Over 80% of the domestic outlays result from the following three programs in the Department of Health, Education, and Welfare. The Partnership for Health program will spend $26 million in 1971, an increase of $3 million, to assist States, regions and local communities to create a planning framework within which health needs and resources can be analyzed, priorities established, improved health care systems designed and alternative courses of action evaluated and recommended. SPECIAL ANALYSES 155 By 1971, State planning agencies in all 50 States, the District of Columbia and five territories, will have completed the organizational phase of their activities and become involved in substantive review and analyses and priority determination. Areawide health planning groups will be increased from 113 in 1970 to 125, and their funding expanded. Recognizing the potential of planning agencies to bring rational considerations to bear on resource development, proposed legislation provides that plans and projects to contruct health care facilities must be presented for their review. Further, the Administration has proposed that Medicare and Medicaid reimbursements for depreciation be limited to medical facilities whose construction proposals have been approved by State health planning agencies. Through the Regional Medical Programs substantial progress has been made in fostering cooperation among medical schools, local health departments, physicians, hospitals, and community groups to achieve prompt delivery to the patient of existing and new medical knowledge and technology, and to carry qualitative improvements in the health care system to all parts of the Nation. To this end, the program will fund advanced education and training for 188,000 doctors and nurses, support certificate training for 21,000 allied health personnel, and finance approximately 170 patient care demonstration and diagnostic screening projects. Outlays in 1971 are estimated to be $68 million, an increase of $19 million over 1970. The increase will permit funding of operational projects in all 55 Regional medical programs. The National Center for Health Services Research and Development is the principal research arm of the national effort to improve the organization, delivery and financing of health services. In 1971, the National Center will focus its attention on developing and evaluating new organizational structures for health care and training health researchers. In addition, the Center will finance and evaluate a special series of experiments in health planning and systems organization conducted through local RMP and Partnership agencies. Budget authority to finance the expanded program will increase from $37 million in 1970 to $50 million in 1971. To achieve closer coordination among the programs and accelerate efforts to improve the effectiveness of the health care delivery system, proposed legislation to continue the programs will also establish a common direction and unified set of objectives. In other efforts to encourage efficiency and reduce costs, several studies have been initiated by HEW using Medicare, Medicaid, and Maternal and Child Health reimbursement payments to experiment with (1) the comparative advantages of prepaid group practice and fee for service care, (2) the application of industrial engineering techniques to establish performance standards for hospitals and other providers of health care, and (3) the use of financial incentives to encourage providers to operate within preset target costs. In addition, the Office of Economic Opportunity will spend $12 million for projects which focus on restructuring rural health delivery systems, reorganizing hospital outpatient departments, and developing prepayment plans for the poor. The Veterans Administration is also devoting efforts to redesigning 156 THE BUDGET FOR FISCAL YEAR 1971 its system of delivering health services to veterans. In 1971, the VA will spend almost $26 million in implementing management and manpower utilization techniques to improve health services for its beneficiaries and to continue development of an automated hospital information system. PROVISION OF HOSPITAL AND MEDICAL SERVICES The Federal Government provides for hospital and medical care in two ways: (1) by financing the costs of health services obtained by eligible beneficiaries in non-Federal facilities or from private physicians; and (2) by directly operating health care facilities for certain groups of beneficiaries entitled to receive medical services at Government expense. Outlays for both of these categories are estimated to reach $16.1 billion in 1971, an increase of 11% over the 1970 level (see table K-7) and 78% of all Federal health outlays in 1971. Table K-7. PROVISION OF HOSPITAL AND MEDICAL SERVICES Outlays (in millions of dollars) Provision of direct Federal hospital and medical services General hospital inpatients Psychiatric hospital inpatients___ Long-term care inpatients _ _ _ Outpatient visits and other services Provision of hospital and medical services, indirect General hospital inpatientsPsychiatric hospital inpatients Long-term care inpatients Physician services—Office, home or institution Outpatient visits and other services Total Nu mber ja|d mitted (in thousands) 1969 1970 1,678 365 66 2,226 129 40 2,196 130 40 2,147 131 42 1,036 1,007 67,597 68,208 67,196 9,933 11,339 12,980 5,486 153 1,133 6,223 184 1,348 7,421 141 1,422 7,527 166 1,091 7,988 193 1,199 8,326 201 1,307 1,961 2,319 2,518 1,201 1,264 1,478 55,541 61,564 66,627 12,793 14,486 16,096 1969 1970 1971 2,860 3,147 3,116 1,543 314 57 1,696 351 64 946 1971 Payment for hospital and medical service.—Medicare.—In 1971, Medicare will continue efforts to achieve its dual objectives of assuring older citizens access to quality medical care and relieving the aged and their families of a major portion of the burden of paying for health services. As Medicare moves toward achieving these purposes, it has necessarily increased the demand for services. While a comparison of preand post-Medicare patterns of utilization by the aged is not currently available, during the first three years of the Medicare program, admissions to hospitals and extended care facilities and use of physicians' services increased substantially. The pattern is expected to continue in 1970 and 1971 as shown in the table below: SPECIAL ANALYSES a. Hospitals: 1967 Admissions (in thousands) 4,967 Admissions per 1,000 covered aged 263 Benefit payments (in millions of dollars) _ _ $2,200 b. Extended care facilities: l Admissions (in thousands) 198.6 l Admissions per 1,000 covered aged __ 10.5 Admissions as a percent of hospital admissions... * 4.0 l Benefit payments (in millions of dollars) $94 c. Physicians' services: Individuals meeting deductible (in thousands)... 6,900 Benefit payments (in millions of dollars) $481 d. Medical prices, percent increase from prior year (as of June in year shown): Medical care services 9.2 Hospital daily service charge 21.9 Physicians' fees _ 7.3 1 157 1968 1969 1970 1971 5.655 5,918 6.233 6,529 313 323 296 291 $3,300 $4,220 $4,726 $5,752 448.5 507.6 567.0 622.0 23.0 25.0 28.5 30.6 9.5 9.1 8.6 7.9 $330 $390 $448 $512 8.810 8,990 9.320 9.660 $1,142 $1,500 $1,789 $1,855 7.1 12.2 5.5 8.7 13.0 7.3 Data represents half-year experience only since benefits began January 1, 1967. From 1968 to 1971 (1967 was somewhat atypical), hospital admissions under Medicare are estimated to increase 15%. When adjusted for population growth, the rise is still 11%. Similarly, the number of aged persons who expend more than $50 a year for physicians' and other outpatient services is expected to increase 9% over the 4-year span. During the same period, benefit payments for hospital insurance increased 74.3%, and 62.4% for physicians fees. In addition to the utilization increase, the sharp rise in medical prices was a major factor in the growth in benefit payments. From July 1966 to June 1969 the cost of medical care services increased 27.1%. By comparison, the overall consumer price index, with medical care excluded, rose 15.9% during the same period. Medicare's rising costs are having a direct impact on the program's financing provisions. Effective January 1, 1970, the deductible paid by an aged person admitted to a hospital increased from $44 to $52. In addition, the monthly premium paid by each enrollee in the Supplementary Medical Insurance program will increase on July 1, 1970, from $4 to $5.30. Finally, in order to assure actuarial soundness of the hospital insurance trust fund, legislation will be proposed to increase the share of the Social Security combined payroll tax allocated to the Medicare program from 1.2% to 1.8% effective January 1, 1971. Efforts to contain Medicare costs have been intensified over the past year. Primarily, they take the form of more careful review of the level of care provided in hospitals and extended care facilities, enforcing utilization review requirements, reviewing physician bills and rejecting unreasonable physician fee increases. In addition the administration has proposed legislation which would: (1) limit Medicare and Medicaid depreciation payments to medical facilities whose capital improvements have been approved by the State health planning agency; (2) bar from the program, hospitals, physicians, and other health service providers found guilty of flagrant abuses; (3) expand utilization review authority to include the initial need for hospitalization. Medicaid.—On the basis of estimates submitted by the States, but adjusted to reflect proposed legislation, total Federal, State, and local 158 THE BUDGET FOR FISCAL YEAR 1971 medical assistance payments on behalf of the needy are expected to rise from $5.1 billion in 1970 to $5.5 billion in 1971. The Federal share of these payments will increase 9.3%, from $2.61 billion in 1970 to $2.86 billion in 1971. Higher outlays reflect an increase in the number of persons served from 10.2 million in 1970 to 11.3 million in 1971, a continued rise in medical prices, greater utilization of services by beneficiaries, and an expansion of the program to all 54 States and jurisdictions by the end of 1971. In terms of the types of services provided, Medicaid is heavily weighted toward inpatient hospital care and nursing homes. In 1970, hospitals and nursing homes accounted for approximately 67% of all Federal Medicaid outlays, while services rendered by physicians represented 11.6%, outpatient hospital services 4.6%, and drugs, 6%. In an effort to reverse these proportions, legislation will be proposed to discourage overutilization of institutional patient care and encourage greater use of hospital outpatient clinics, comprehensive health centers, and home health services. As in the past, eight States will receive approximately 60% of Federal Medicaid payments, reflecting their more liberal income eligibility standards, larger populations, and wider scope of available health services. When totalMedicaid payments, including Federal, State, and local contributions are calculated, these eight States represent an even larger proportion of the program reaching almost 75% in 1971. These States, however, account for only about a third of the Nation's poor, an indication that a substantial unmet need for medical assistance for the poor continues to exist in many areas. Maternal and Child Health Service,—Whereas Medicaid's emphasis is the elimination of financial barriers to medical care for the poor, the Maternal and Child Health Service, in contrast, concentrates on bringing health services into areas where health resources are not available or are insufficient to meet the health needs of the poor. The major thrusts of the programs of the Maternal and Child Health Service are to reduce infant and maternal deaths and birth defects, and provide family planning services to women who want but cannot afford such services. In 1971, the Maternal and Child Health Service will grant $241 million to provide necessary health care for over 2 million mothers, infants, and crippled children. A portion of these grants will be matched by $163 million in State expenditures. Federal Employees Health Benefit program (FEHB) .—Civilian Federal employees and retired employees and their families are offered a choice of five types of health insurance plans, including group practice plans, with the Federal Government contributing a fixed amount per participant but not more than 50% of the premium. While premiums have increased since 1961, the per capita Federal payment has remained relatively constant so that the proportion of Federal payments to total premiums has declined from 37% in 1961 to 23% in 1971. During the same period, Federal payments increased from $121 million to $249 million, and employee contributions rose from $200 million to $817 million, reflecting in part the growth in employees, their dependents, and annuitants participating in the program to 7.9 million in 1971. In addition to the in SPECIAL ANALYSES 159 crease in participants, the rise in program costs is attributable to increasing medical prices and greater utilization of health services by FEHB participants. Providing medical care directly to Federal beneficiaries.-—The Federal Government provides direct Medical care for members of the Armed Forces and their dependents, retired servicemen and their dependents, veterans, merchant seamen and American Indians. Outlays for this purpose have declined from 49% of total Federal health expenditures in 1960 to 15% in 1971, primarily as a result of the rapid growth in Federal outlays for payment of hospital and medical care through the Medicare and Medicaid programs. Direct Federal care still remains a major program element, however, with outlays expected to total $3.1 billion in 1971, a decrease of $31 million from 1970. To provide health services for the Nation's 2.9 million military personnel, retired military personnel, and dependents of both groups, the Department of Defense will maintain 251 hospitals and 54,414 beds in 1971 and contract with community medical facilities. Outlays to operate this health care system will decrease to $1,785 million, down $37 million from the 1970 level. This decrease in expenditures is the result of the reduction in the size of the Armed Forces and number of dependents, offset to some extent by civilian and military pay increases and the higher cost for care in community facilities. The Veterans Administration operates 166 hospitals, 98 long-term care units and 202 outpatient clinics, one of the largest health care systems in the world. In 1971, 822,000 beneficiaries will be admitted to VA hospitals and extended care facilities, and medical outpatient visits will increase from 6,947 million in 1969 to 7,852 million in 1971. Outlays for medical care within the VA system will increase to $1,474 million and outlays for contract care will rise to $88 million. Legislation will be proposed to require health insurance plans to reimburse VA hospitals for the cost of care provided to their policyholders when their hospitalization is not service-connected. The VA medical system will continue to improve the quality of patient care and the efficiency with which it is delivered. Ninety-four VA hospitals are affiliated with medical schools, representing 18% of all university affiliated hospitals in the country. The number of specialized medical services will also continue to rise in 1971. For example, intensive coronary care beds will increase from 629 in 1969 to 1,422 by the end of 1971. Similarly, the average monthly patient turnover rate has increased from an overall average of 9% in psychiatric hospitals and 81% in general hospitals in 1965, to an estimated 22% and 103%, respectively, in 1971. The Department of HEW will operate eight general hospitals, two narcotic hospitals, one leprosarium, 51 Indian health facilities, a Federal mental institution, and 30 PHS outpatient clinics in 1971. These facilities will service over 400,000 American Indians and natives of Alaska, nearly 200,000 American seamen, 132,000 U.S. Coast Guard personnel and their dependents, narcotics addicts, and persons committed or voluntarily presenting themselves for treatment at St. Elizabeths Hospital in Washington, D.C. Of the $3,116 million expended for direct care, $133 million will provide expanded health 160 THE BUDGET FOR FISCAL YEAR 1971 services to the Indian population and sanitation facilities for approximately 7,310 Indian families, bringing the total number of Indian homes provided with sanitation facilities to 48,000. Distribution of health care outlays by age groups and economic status.—Table K-8 distributes the Federal outlays for the "provision of hospital and medical services" category among three major age groups and between indigent and nonindigent persons. Funds expended for categories relating to the development of health resources and for the prevention and control of health problems are designed to serve the entire Nation and are not normally allocable by population group or income. Table K-8 indicates that the largest health expenditure increase both in percentage and in absolute terms, will be for the aged, rising 13% in 1971 from $9.2 billion to $10.5 billion. The second largest percentage increase will be for children and youth, a 9% increase over 1970, reflecting the administration's emphasis on providing health services during infancy and early childhood. In 1971, $6.2 billion will be spent to provide or finance health care services for the needy, an increase of 9% over 1970, and an increase of 95% over 1967. Of total outlays in 1971 for provision of health services, 65% will be on behalf of the aged. The 1971 increase of $1.3 billion over 1970 is almost entirely attributable to increased outlays under the Medicare program. Medicaid payments for the aged will decrease slightly in 1971, reflecting the administration's proposal to reduce support for long term care in nursing homes and mental hospitals. Despite the decrease, Medicaid benefits remain heavily weighted toward the aged. In 1971, 44% of the Federal Medicaid payments will go for the aged, although they comprise 30% of the program's beneficiaries. Federal funds in total continue to pay approximately 60% of the personal health care costs of the aged. In 1966, prior to Medicare and Medicaid, the Federal share was 15%. Table K-8. ESTIMATED HEALTH CARE OUTLAYS BY POPULATION AND INCOME GROUPS (in millions of dollars) 1967 1969 1970 1971 Total, all recipients 7,831 12,793 14,485 16,096 Aged (65 and over) Other adults (19-64) Children and youth (0-18) 4,379 2,535 917 8,071 3,427 1,295 9,237 3,814 1,443 10,473 4,059 1.564 Indigent, total 3,178 5,116 5,672 6,192 Aged (65 and over) _ Other adults (19-64) Children and youth (0-18) 1,968 850 360 3,281 1,218 618 3,581 1,398 693 3,797 1,587 808 4,653 7,678 8,813 9,094 2,411 1,685 577 4,790 2,210 677 5,656 2,417 740 6,676 2,472 756 Nonindigent, total Aged (65 and over) Other adults (19-64) Children and youth (0-18) SPECIAL ANALYSES 161 Although total outlays for all the aged increase 13% in 1971 over 1970, outlays for the aged indigent will rise only 6%. The more rapid increase in outlays for the nonindigent results primarily from the enactment of the 15% increase in cash benefits for Social Security beneficiaries which reduced the percentage of the indigent aged from 34.5% on January 1, 1969, to 30% on January 1, 1970. Federal health outlays for children from birth to 18 years will increase 9% to $1.6 billion in 1971. Of the $131 million increase over 1970, $90 million is attributable to Medicaid which will provide almost $600 million in services to this age group. Outlays by the Department of Defense for children of servicemen will decline slightly to $596 million, reflecting the reduced size of the armed forces. Other significant increases are provided by OEO and the Maternal and Child Health program. Virtually the entire increase in health outlays for children and youth will be aimed at needy families. In 1971, 52% of outlays will serve poor children as compared to 1967 when only 39% of services for children and youth went to the poor. This reflects the administration's policy of directing an increasing proportion of outlays toward needy children. In 1971, $4.1 billion will be spent to provide medical services to nonaged adults. More than half of these funds will be directed toward the poor, the bulk of which will pay for health care rendered to veterans, servicemen and Federal employees, as well as eligible dependents. Of the $1.6 billion which will be spent for hospital and medical care to needy adults, $805 million will come from Medicaid, $480 million from the Veterans Administration and the remaining $300 million from a number of smaller programs including OEO's neighborhood health centers, the Vocational Rehabilitation program and the Maternal and Child Health program. Seventy-seven percent of the increase over 1970 for nonaged adults will be for the poor. This reflects primarily the increase of $137 million in Medicaid outlays. PREVENTION AND CONTROL OF HEALTH PROBLEMS Significant savings in terms of human life and economic productivity, conservation of our limited health resources, and avoidance of needless pain and suffering have been achieved in recent years by increased efforts to prevent and control health problems. Efforts in this area will be increased in 1971 with total outlays of $866 million. Some of the activities classified under the two previous categories—Development of Health Resources and Provision of Health Services—could also be included in this category (e.g., portions of health research, manpower training, planning of health services, and family planning). However, because of the difficulty of separating prevention activities from medical treatment activities in such programs, only those programs which in their totality are directed toward prevention and control are included in this category. Until recently, the principal activities under this category were of the traditional "public health" character—that is, efforts directed at large population groups to prevent or control a specific disease, such as tuberculosis. Although such activities are still important and are 390-700 0—70 11 162 THE BUDGET FOR FISCAL YEAR 1971 strongly supported by State and local governments, the trend being emphasized by the Federal Government is toward comprehensive health care which includes prevention activities, and toward an attack on environmental factors, which, in addition to their immediate impact, often produce subtle and long-term effects on health. Table K-9. FEDERAL OUTLAYS FOR THE PREVENTION AND CONTROL OF HEALTH PROBLEMS (in millions of dollars) 1969 Disease prevention and control Environmental control Consumer protection Total 1970 1971 411 186 154 489 M34 181 504 M63 199 651 804 866 1 Does not include environmental research shown under "Health Research" (1969—$87. 1970— $112. 1971—$135). Disease prevention.—The movement from categorical disease programs toward comprehensive health care is accentuated in this year's budget with the major thrust being made in the various health center programs which are described under Special Impact programs. While the emphasis is shifting from categorical to comprehensive programs, critical disease areas will continue to receive concentrated efforts. Through the Regional Medical program, education and training programs will be sponsored to increase public awareness of the relationship between nutrition and health, the adverse effects of smoking on health, and the methods available to treat kidney diseases ranging from transplantation to utilization of artificial kidney machines. In 1963-64 an estimated 20,000 to 30,000 children with birth defects were born to mothers who had contracted rubella (German measles) during pregnancy. With the licensing of a new vaccine in June 1969, a joint Federal-State-private effort was launched to inoculate 55 million children age 1 through 14. With the $16 million requested in the 1971 budget, almost $42 million will have been allocated to immunize children in low-income families and to motivate other families to obtain the vaccine through their private physicians. Disease surveillance conducted by the National Communicable Disease Center (NCDC) provides a national alarm system to isolate outbreaks of contagious diseases. All cases of 36 different diseases are reported weekly to the center in Atlanta by State health departments. State surveillance is supported, in part, by grants from the Partnership for Health program. Followup support such as vaccine and epidemiologic personnel is often furnished by the NCDC. In order to improve the health status of many of the remote communities in its region, the Appalachian Regional Commission has allocated over $17 million of its 1971 budget to develop health care programs to reduce disease and improve the environment. Almost half of this sum will be used for mental health programs. Through three programs, the United States has maintained its commitment to improve the health care and health conditions of other Nations. The Peace Corps has enlisted the voluntary services 163 SPECIAL ANALYSES of doctors, nurses, and others with medical knowledge, to aid underdeveloped nations develop a health care capability. Over half of the $12 million spent by the program is for training and treatment in areas of nutritional deficiencies, communicable disease control and eradication, sanitation, education of indigenous populations, and development of demographic surveys. In cooperation with other international health organizations such as WHO and the Pan American Health Organization, the Agency for International Development (AID)/ supplies technical assistance and financial support to less developed countries for family planning, disease control and eradication, environmental health, nutrition and research. The State Department also provides grants for these purposes to WHO and PAHO, both of which train health workers and award fellowships for study in certain selected fields aimed at improving health care and services. In 1971 outlays by AID and the Department of State for disease control purposes will be $138.3 million. Environmental control.—Reflecting the growing awareness of the impact of environmental factors on health, outlays for environmental health in 1971 including environmental research, will total $298 million, a 73% increase over 1969. These outlays provide for research and control efforts in such areas as air pollution, solid wastes, radiation hazards, occupational safety and health, public water supplies, environmental sanitation, and noise control. Outlays for the control of air pollution in 1971 will total $104 million, a 31% increase over 1970. Special emphasis will be placed on the development of technology to control the wastes, and on the strengthening of institutional arrangements for enforcement and control. In 1971 56% of the national air pollution budget will be obligated for research on control technology. As table K-10 demonstrates, controls already required by the Federal Government will reduce carbon monoxide emissions by 1980 to half the 1967 level and hydrocarbon emissions to one-third. However, unless new control technology is developed, these emissions will rise again because of the growing number of vehicles. Research on vehicle emission control will be increased in 1971 in cooperation with private industry. Table K-10. VEHICLE EMISSION CONTROL i (in millions of tons per year) 1967 Vehicle emissions prevented by control devices: Hydrocarbons _ Carbon monoxide. _ Vehicle emissions released to the atmosphere: Hydrocarbons Carbon monoxide 1 2 (2) (2) 16 61 1971 1980 1985 1969 1970 1 4 2 9 4 15 20 11 42 17 66 21 82 25 99 15 59 14 57 13 53 12 50 8 39 5 31 6 35 7 42 1968 5 1975 Data furnished by the National Air Pollution Control Administration. HEW. Less than 500 thousand tons. Efforts to develop feasible control technology for sulfur oxides, nitrogen oxides, and other pollutants from stationary sources will also 164 THE BUDGET FOR FISCAL YEAR 1971 be increased in 1971, but the private sector will be asked to provide a substantial portion of the financing for the prototype tests of these control processes. The strengthening of institutional arrangements for enforcement and control of air pollution will also receive major emphasis in 1971 with increased financial and technical assistance to the States and localities, many of which will be engaged in establishing standards under HEW's guidance. Most of the standard setting will be centered in the 57 Air Quality Control Regions which will have been established by HEW by the end of 1970. These regions contain 53% of the urban population. State and local expenditures for air pollution control exclusive of Federal funding have increased by 213% since 1965 and are now estimated at about $30 million. In the past, the State and local air pollution control agencies have had considerable difficulty in obtaining qualified personnel to handle their scientific, technical, and administrative problems. In an effort to help meet this need, HEW will devote special attention to the distribution of trained manpower by concentrating on short-term specialty training programs and recruitment efforts and a new effort to assign Federal personnel to States and communities to work under the supervision of State and local air pollution control agencies. Accidents from all causes continue to fill half of the Nation's hospital beds. In response to this problem the Departments of Labor, Interior, and HEW will increase their research and enforcement activities to prevent accidents and diseases in the workplace, with special emphasis on coal mining. These accident-related activities are in addition to other safety programs not shown in this analysis including the rail, boat, highway, and traffic safety programs of the Department of Transportation. The outlays for other environmental health programs will remain at essentially the same level as in 1970. However, HEW will begin review of State solid waste management plans developed as a first step toward improving the 90% of our land disposal sites which do not meet minimum criteria and the 70% of our municipal incinerators which do not have any air pollution controls. In addition, increased emphasis will be placed on the development of productive economic incentives for industry and the consumer to reduce the amount of solid wastes generated. Consumer protection.—Programs to protect the consumer from illness and injury resulting from hazardous drugs, foods, pesticides, and household products will be expanded in 1971, with outlays totaling $199 million. The Department of Agriculture has initiated cooperative programs with the States to assure that all meat and poultry are suitable for human consumption. This program will increase to $125 million, a rise of 39% over 1969. Other food protection programs, including those of the Food and Drug Administration and the Bureau of Commercial Fisheries, will increase by 17% in 1971, and will emphasize research on the health effects of food additives and pesticides. SPECIAL ANALYSES 165 New efforts will be directed at associating particular drugs or products (such as toys, appliances, tools, and household cleaners) with reports of adverse effects or accidents in order to provide a sharper focus for the Federal Government's regulatory efforts. Standards have already been set for radiation from color television sets as part of a new emphasis on preventing exposure of the public to hazardous radiation from electronic products. Standards will be set soon for microwave ovens and other electronic products. SPECIAL IMPACT PROGRAMS Several programs have been selected for extended discussion in this section because of their special significance in the 1971 budget. Outlays for these programs are classified in one or more of the major categories in table K-2. Family planning.—In his Message on Population, July 18, 1969, the President established as a national goal, "the provision of adequate family planning services within the next 5 years to all those who want them but cannot afford them." Funds to meet this objective and to assist other nations will increase from $125 million in 1970 to $218 million in 1971. The funds will expand both biomedical and attitudinal research, train health personnel to deliver family planning services, and provide family planning services to over 2.2 million of the 5 million poor women referred to by the President. This compares to 1.6 million served in 1970 and 1.0 million in 1969. Almost all domestic family planning funds will be spent by HEW and OEO, with obligations rising to $103.0 million and $24.0 million in the two agencies, respectively. Of the HEW obligations $28.3 million will be used by NIH to train research personnel and to further its research efforts in reproductive physiology and improved methods of contraception. With funds totaling about $61.6 million in 1971 from the Maternal and Child Health program and from new legislative authority, the new National Center for Family Planning Services will undertake increased research in the sociological and attitudinal aspects of family planning and provide family planning services to an estimated 1.6 million low-income women. An additional 2.3 million women will be served by other programs in HEW, notably Medicaid, with obligations for family planning services estimated at $6.1 million in 1971. OEO's 1971 funds will enable the agency to reach 0.4 million women, 50,000 more than served by the agency in 1970. Most of the funds will be directed through an estimated 250 Community Action Agencies and other institutions sponsoring family planning programs. A portion of OEO's 1971 outlays will be used to explore innovative ways of providing family planning services to women residing in rural and other areas isolated from easy access to information and physicians7 services. Internationally, the State Department and AID are expected to make about $90 million available in 1970 compared to a comparable figure of $51 million in 1970 for international family planning activities, both through contributions to international organizations and in direct aid to 31 foreign governments. 166 THE BUDGET FOR FISCAL YEAR Table 1971 K-ll. ESTIMATED OBLIGATIONS FOR FAMILY PLANNING SERVICES, RESEARCH, AND TRAINING (in millions of dollars) 1968 Services J to low income persons (total) 1969 1970 1971 16.0 34.7 57.8 91.7 Health, Education, and Welfare (total) 7.5 20.9 35.8 67.7 National Center for Family Planning Services Maternal and Child Health Medicaid Office of Economic Opportunity. _ 6.0 1.5 8.5 18.4 2.5 13.8 31.8 4.0 22.0 43.8 17.8 6.1 24.0 8.4 20.3 22.8 36.4 7.7 .6 .1 11.4 .6 .3 15.5 1.1 6.2 28.3 1.1 7.0 35.2 47.3 44.5 90.2 34.6 .6 44.7 2.6 41.8 2.7 86.0 4.2 59.6 102.3 125.1 2I8.3 Research National Institutes of Health _ Food and Drug Administration Agency for International Development International activities (total) Agency for International Development Department of State Total 1 __. Includes training. Federally supported health centers.—In recent years compre- hensive community based health centers have been established to overcome the problems posed by inadequate health care resources in poor rural and urban areas. While each agency supporting health centers (OEO, Maternal and Child Health Service, NIMH and Partnership for Health) must meet certain specific objectives contained in their authorizing legislation, all are concerned with bringing into low-income areas health resources—clinics, physicians and health workers—that are either nonexistent, in short supply or not readily accessible. In addition to creating health care resources, the centers seek a comprehensive and personal approach to the delivery of medical care, the utilization of scarce resources in more effective and efficient ways, and the application of modern health technology. Many sponsor training and employment programs for residents of the communities served by the health centers and encourage participation of the poor in the planning and operation of the centers. It is becoming increasingly evident that the care being provided through the centers is having an impact on the health status of the poor. In areas served by maternity and infant care centers of the Maternal and Child Health Service for example, reductions of up to 33% in infant deaths have occurred after the establishment of the center in the area. In 1971, 517 health centers will be funded wholly or in part with $289 million in Federal project grants, an increase of 67 centers and $60 million over 1970. As indicated in table K-12, the majority of the centers are for the treatment of mental illness, mothers, infants and children. The number of comprehensive health centers serving the entire community will also be significantly increased in 1971 by Partnership for Health. Part of the increase derives from the transfer of 167 SPECIAL ANALYSES a number of centers previously funded by OEO that have reached full operational status. It is estimated that all federally supported centers will serve approximately 1,976 million persons in 1971. Table K-12. FEDERALLY FUNDED HEALTH CENTERS 1968 Total Federal obligations (millions) _ 1969 1970 1971 146.5 193.7 228.7 288.5 4.1 66.4 43.0 33.0 10.4 75.0 56.0 52.3 20.7 76.1 58.0 74.0 32.4 83.1 83.0 90.0 ___ _ 8 111 156 43 18 111 218 49 25 112 258 49 35 115 298 49 Number of persons served in year (thousands): Partnership for Health Maternal and Child Health NIMH 0 380 23 532 137 550 171 560 177 135 300 300 391 500 495 750 1 Partnership for Health Maternal and Child Health NIMH _ _ . OEO1 _ Number of centers funded: Partnership for Health1 Maternal and Child Health NIMH (operating grants) OEO1 OEO 1 . . . ._ Some centers will be shifted from OEO to Partnership for Health in 1971. Narcotic addiction and alcoholism—Emphasis in the 1971 budget has been placed on a four-pronged attack on drug abuse and alcoholism in cooperation with local programs. The major thrust in this attack will be an expansion of specialized narcotic addict treatment clinics. Funds for treatment centers supported by OEO grants and NIMH community assistance projects will rise from $10 million in 1970 to $17.6 million in 1971. These funds will continue 31 centers now in operation and add 21 additional centers. Similarly, outlays of $6 million will support 24 specialized centers to treat alcoholism. In addition, outlays to assist over 1,600 self-committed addicts receiving treatment services in their home area will rise to $7.7 million from the 1970 level of $5 million. Increased public information on drug abuse and alcoholism will also be carried forward by NIMH and the Bureau of Narcotics and Dangerous Drugs. Almost $4 million has been allocated in 1971 for production of movies, spot radio and television messages, and other educational material. The third focal point will be the training of personnel as diverse as former drug addicts and educators, law enforcement officers and alcoholics in a wide variety of treatment procedures. This training program will spend $4.5 million in both 1970 and 1971. In addition, NIMH will increase fellowships for research study in both drug abuse and alcoholism, as well as widen support to institutions providing such training. Research supported and conducted by NIMH has brought significant breakthroughs both in understanding the effects of drugs and 168 THE BUDGET FOR FISCAL YEAR 1971 alcohol on man and in finding chemical processes which can begin to reverse the processes of addiction and alcoholism. More refinements and testing of remission agents will be a key part of the research program supported by a budget of over $27 million in 1971. HISTORICAL RlssuMf; Table K-2 classifies Federal health outlays for the years 1969 through 1971. The following table K-13 distributes Federal health outlays by function for the period 1960 through 1968. The data for 1960 are not strictly comparable, representing "funds provided" rather than outlays. Table K-13. FEDERAL OUTLAYS FOR MEDICAL AND HEALTH-RELATED ACTIVITIES BY CATEGORY (in millions of dollars) Development of health resources, total Health research Training and education Construction of hospitals and health facilities Improving the organization and delivery of health services 2 Provision of hospital and medical services, total... Direct Federal hospital and medical services Hospital and medical services, indirect Prevention and control of health problems, total Total outlays from Federal and trust funds 19601 1963 1964 1965 1966 1967 1,017 510 217 1,529 892 257 1,806 1,069 298 1,807 1,040 317 1,956 1,167 410 2.430 1,364 593 2,803 1,547 687 290 380 439 450 378 391 470 82 100 1968 2.165 2,783 2,904 2,936 3,521 7,831 10,764 1,701 1,877 1,971 2,022 2,199 2,552 2,738 464 906 933 914 1,322 5,279 8,025 326 346 393 418 451 540 565 3,508 4.658 5.103 5,161 5,928 10,801 14.132 1 Report of the Committee on Government Operations, U.S. Senate: "Coordination of Federal Agencies" programs in bio medical research and in other scientific areas, report No. 142, Mar. 30. 2 Not tabulated in 1960-66 as a separate subcategory. EXPENDITURES FOR HEALTH ACTIVITIES BY AGENCY The following tables distribute the health-related expenditures of Federal agencies by the categories used in this analysis. Except for HEW and a small part of the Civil Service Commission, the outlays of these agencies are, because of their major purpose, assigned to functions other than Health (650) in Part 4 of the budget document. The tables, therefore, indicate the predominant budget functional code for each agency. Other special analyses such as those on Research and Development, Education, and Manpower also include all Federal outlays in their area. They will thus include, where pertinent, the same outlays which are tabulated in this analysis. Table K-14. FEDERAL OUTLAYS FOR MEDICAL AND HEALTH-RELATED ACTIVITIES B \r AGENCY, 1969 (in millions of dollars) Funccode Department of Health, Education, and Welfare Health Services and Mental Health Administration National Institute of Health Consumer Protection and Environmental Health Service.. Social Securitv Administration Social and Rehabilitation Service.Other Department of Defense Veterans Administration Deoartment of Housins and Urban DeveloDment Department of Agriculture Agency for International Development Office of Economic ODDortunitv National Aeronautics and Soace Administration Atomic Enersv Commission Civil Service Commission Department of Labor Deoartment of State National Science Foundation .. Department of Commerce Other agencies Agency contributions to employee health funds__ Total outlays for health, 1969 _. Health Training 1,109.5 126.5 895.6 58.4 554.3 135.7 400.4 10.1 322.7 316.3 5.6 650/700 29.0 051 800 83.8 52.2 8.1 6.0 119.9 77.5 40.1 2.6 .8 .1 71.8 45.7 118.4 20.9 .8 11.1 13.1 28.5 650 650 650 650 550 350 150 550 250 058 906 604 150 605 500 110.4 94.3 .3 23.4 3.1 8.1 1,527.7 .7 116.0 100.3 15.6 Direct Indirect Preven- medical and medical of health problems 120.8 120.5 .3 1,395.6 1,310.3 805.5 612.0 1.8 20.8 126.0 28.1 2.8 3.8 5.3 34.7 6,597.7 2,387.8 8.1 213.1 65.1 379.9 267.1 5.4 105.7 133.2 65.9 .2 1.2 9,217.0 220.4 166.1 1.4 .1 40.7 14.9 .3 2.6 21.8 32.6 1.4 246.6 27.2 2,860.3 9,933.2 651.5 11,820.3 1,286.9 1,322.6 174.2 6,597.7 2,427.8 14.3 1,905.1 1,571.6 119.2 173.4 121.2 126.0 110.6 95.0 40.7 47.3 25.0 27.2 8.4 104.6 246.6 16,556.4 TabIeK-15. FEDERAL OUTLAYS FOR MEDICAL AND HEALTH-RELATED ACTIVITIES BY AGENCY, 1970 (in millions of dollars) Functional code Department of Health, Education, and Welfare Health Services and Mental Health Administration __ National Institute of Health _ . Consumer Protection and Environmental Health Service Social Security Administration-_ Social and Rehabilitation Service.. Other Department of Defense __ Veterans Administration Department of Housing and Urban Development Department of Agriculture Agency for International Development Office of Economic Opportunity National Aeronautics and Space Administration Atomic Energy Commission -Civil Service Commission Department of Labor Department of State -National Science Foundation.. _ Department of Commerce ._ Other agencies Agency contributions to employee health funds _ Total outlays for health, 1970. 650 650 650 650 650/700 051 800 550 350 150 550 250 058 906 604 150 605 500 Health research Training and Construe- Organization and delivery medical 160.9 132.4 916.8 81.8 672.9 166.9 484.9 358.2 345.5 9.8 29.9 10.2 6.5 3.0 .9 80.3 62.9 130.5 52.1 73.6 150.9 25.2 3.0 12.5 ...... 35.6 1.0 43.2 8.6 115.2 101.1 .3 26.3 3.5 19.3 1,621.7 Direct Federal hospital 10.9 92.2 11.5 155.5 137.3 18.2 131.9 131.5 .3 1.515.4 1,463.6 4.8 51.8 951.0 705.1 220.4 7,537.8 2,753.0 7.9 232.0 77.7 439.8 291.1 7.8 124.4 16.4 22:3 147.9 Total 13,477.0 1.456.9 1.437.5 217.1 7.537.8 2.812.9 15.4 2.032.6 1.795.2 154.0 206.8 176.3 148.9 115.5 101.7 41.2 51.7 41.2 18.5 .3 3.3 25.0 34.7 3.6 251.7 41.5 153.4 251.7 3.147.3 11,338.6 803.5 18.787.6 1.5 .2 2.3 10,557.7 252.2 Prevention and control of health problems 163.6 108.1 .6 28.1 3.0 3.4 Indirect Federal hospital and medical 28.4 29.7 8.3 TableK-16. FEDERAL OUTLAYS FOR MEDICAL AND HEALTH-RELATED ACTIVITIES BY AGENCY, 1971 (in millions of dollars) Functional Department of Health, Education, and Welfare Health Services and Mental Health Administration National Institute of Health . Consumer Protection ;and Environmental Health Service Social Securitv Administration Social and Rehabilitation Service Other Department of Defense ,_ Veterans Administration DeDartment of Housincr and Urban Development Department of Agriculture Agency for International Development_ _-___ Office of Economic Opportunity National Aeronautics and Space Administration Atomic Enenzv Commission Civil Service Commission Department of Labor. _ _ _ Department of State National Science Foundation Department of Commerce _ _._ _ . . _ » _ _ _ . Other agencies _ »_ Agency contributions to employee health funds Total outlays for health, 197L 650 650 650 650 650/700 051 800 550 350 150 550 250 058 906 604 150 605 500 Health Training and Construe- 1,193.0 135.9 929.3 97.3 748.3 170.8 554.2 13.4 347.1 334.0 3.7 30.5 84.2 63.0 9.8 7.7 128.7 99.4 44.4 9.6 9.3 10.1 62.2 54.2 178.7 6.7 6.8 111.8 94.2 .3 25.8 3.9 29.8 1,660.0 tion and 173.1 154.9 18.2 Indirect hospital control medical services medical services problems 140.1 139.7 .4 25.6 2.6 Preven- Direct hospital 1.463.7 1,473.5 22.1 12.0 12,145.8 317.7 8,774.4 3,034.3 9.5 238.0 88.1 165.9 464.8 292.7 8.0 143.1 20.9 20.7 175.6 110.2 .4 31.5 2.8 3.0 4.2 3.7 48.8 1,032.8 711.6 235.5 Total of Ii*ji1f-h 1.7 .2 46.5 21.0 .3 3.6 28.1 36.5 7.6 256.9 64.5 3,115.7 12,979.5 15,212.1 1,545.7 1,513.4 253.8 8.774.4 3,105.3 27.4 1,997.6 1,803.8 181.3 219.4 155.4 177.9 111.8 94.6 46.5 58.1 31.4 28.8 7.6 191.4 256.9 866.9 20,602.0 SPECIAL ANALYSIS L FEDERAL INCOME SECURITY PROGRAMS Overview.—The Federal Government plays a major role in providing income security for individuals and families. Income security is extended through transfer payments. Payments may be made in cash or "in kind." This analysis groups cash benefit programs according to the basis for benefit determination. The three program classifications are: income replacement programs such as social security and unemployment insurance, which relate benefits to wage histories; income support programs like public assistance, which make payments based on need; and income compensation programs which base benefits on some other measure of impairment to earning capacity (disability compensation for veterans is the largest program in this third group). Programs providing assistance in kind are classified by the type of benefit provided. The three groups of in-kind benefit programs are health care programs (Medicare and Medicaid), food and nutrition programs such as the food stamp program, and housing programs (public housing and rent supplements). Following the discussion of cash and in-kind benefit programs, a summary of Federal aid to the poor is presented. Federal budget outlays for programs included in this analysis will total $71.6 billion in 1971. This amount is 36% of total budget outlays, and 54% of nondefense spending. Income security outlays constitute 97% of Federal domestic transfer payments and 35% of Federal aid to State and local governments in the national income accounts. Trust funds account for 70% of Federal income security payments. Cash payments make up 80% of total payments in 1971 (social security payments alone are 47% of the total). The largest in-kind benefit program is Medicare, with 1971 outlays of $8.8 billion. Table L-l summarizes the outlays for these programs, with subtotals for cash and in-kind benefit programs. A detailed listing for each program, by agency, is provided in table L-16. 172 SPECIAL 173 ANALYSES Table L-l. FEDERAL OUTLAYS FOR INCOME SECURITY P R O G R A M S Federal outlays for cash benefits (millions): Social security (OASDI) Federal employee benefits Veterans benefits Public assistance Unemployment trust fund Railroad retirement Other programs Proposed legislation Subtotal, outlays, cash benefits. Federal outlays for in kind benefits (millions): Food and nutrition Health care Housing Proposed legislation Subtotal, outlays, in kind benefitsTotal, benefit outlays Federal outlays for administration Total, outlays, income security _ 1969 1970 $26,175 4,938 5,285 3,370 2,158 1,533 49 $29,154 5,800 5,679 4,081 2,713 1,620 88 44 $32,897 6,557 5,846 4,647 3,046 1,695 239 552 43,508 49,179 55,479 1,150 8,481 344 1,530 9,711 2,201 11,377 476 1971 stimate 663 -215 9,975 11,717 14,026 53,483 1,668 60,896 1,920 69,505 2,081 55,151 62,816 71,586 Historical perspective.—Although there are substantial income security expenditures from private and from State and local sources, Federal outlays constitute an increasing portion of these payments. Total cash benefits have risen from $1.1 billion in 1929 to $58.2 billion in 1967, with the Federal Government accounting for almost 70% in recent years. Private income security expenditures are mostly for employee pension plans which, together with social security and public employee retirement systems, constitute the primary source of income for most of our elderly citizens. In addition to employee retirement, State and local governments help finance two other major types of income security payments: workmen's compensation for those disabled by work-related injuries; and the non-Federal share of public assistance payments to the poor. Table L-2 illustrates the distribution of income security expenditures by source.1 1 The data in tables L-2 and L-3 are compiled from publications of the Social Security Administration and are not exactly comparable with the budget data in the other tables. 174 THE BUDGET FOR FISCAL YEAR 1971 Table L-2. INCOME SECURITY EXPENDITURES FOR CASH BENEFITS BY SOURCE OF FUNDS, FOR SELECTED FISCAL YEARS Cash benefits (in billions] 1929 Income replacement programs: Federal State and local Private Income support programs: Federal State and local Private. _ Income compensation programs: Federal. _ _ _. State and local _ Private Cash benefits, total: Federal State and local Private. _ _ _ _ 1950 1960 1967 $2.1 2.8 1.0 $14.3 5.0 3.6 $30.7 6.7 7.2 0.1 NA 1.5 1.9 NA 2.2 2.1 NA 4.3 3.7 0.5 0.6 2.6 3.9 5.1 0.7 0.4 NA 6.2 4.7 M.O 20.4 7.1 40.1 10.4 7.7 $0.1 0.3 NA (i) 23.6 1 Less than $50 million. Does not include private expenditures for income support. N A = Not available. 2 Total income security expenditures have grown as a percentage of gross national product (GNP) from 5% in 1950 to 8% in 1967. Similarly, the Federal portion of the total has displayed impressive growth, rising from 2% of GNP in 1950 to 5% in 1967. Table L-3. INCOME SECURITY EXPENDITURES FOR CASH BENEFITS AS A PROPORTION OF GROSS NATIONAL PRODUCT, FOR SELECTED FISCAL YEARS Gross national product (billions) Income security expenditures (cash benefits): Total (billions) As percent of GNP Federal (billions) As percent of GNP 1 2 1929 1950 $101.0 1 $0.7 1 1960 1967 $263.3 $495.2 $768.8 2$11.9 5 $6.2 2 2 $31.1 6 $20.4 4 $58.2 8 $40.1 5 Does not include any private expenditures. Does not include private expenditures for income support. Proposals for reform.—Income security programs are continually evolving through both legislation and administrative regulation as problems with existing program structures are identified. The most common adjustments deal with: the inadequacy of benefits; inequities in benefits among different beneficiary groups and in the financing burden among different taxpayer groups; definitions of benefit entitlement; and effects on individual behavior and incentives. The following two sections discuss proposed legislation and the more important steps taken in the past year to meet these recurring problems. 175 SPECIAL ANALYSES In the past year, income security programs have become a high priority area for basic system reform, and several Administration proposals are now under consideration by the Congress. Estimated 1971' outlays for these proposals total almost $1 billion, and the costs for the first full year of effect are expected to be $6.4 billion (see table L-4). The most important legislative proposal before the Congress is the family assistance program (FAP). This proposal would replace the outmoded Federal-State program of aid to families with dependent children (AFDC) with a new Federal income maintenance program for all poor families with children, thereby aiding the working poor for the first time. Table L-4. REFORM PROPOSALS FOR INCOME SECURITY PROGRAMS (in millions of dollars) Additional outlays over existing program Proposal 1970 Family Assistance legislation Food stamps L _ Social security Railroad retirement Unemployment insurance VA compensation and pensions. Medicaid _ Special milk 1 Total. 1971 +500 +674 +44 +44 First full year -52 -215 -64 +4,400 2 +825 +1,300 +104 +170 -52 -300 -81 +955 +6,366 +104 +8 1 These proposals are a part of authorizing legislation and are not carried in the "proposed legislation" entries in other tables. 2 This estimate assumes enactment of FAP; in the absence of FAP, the food stamp proposal would cost $1.9 billion in the first full year. Under FAP, a family of four with no other income would receive $1,600 a year. The basic allowance would be reduced by 50% of annual2 earnings in excess of $720, and by 50% of all nonearned income. Total income increases with earnings; thus a strong work incentive is provided. An eligible recipient is entitled to keep the first $720 of annual earnings and to retain 50% of his earnings thereafter. For an AFDC-eligible family entitled to higher benefits under the existing AFDC program, the FAP payment would be supplemented by the State so that no family's income would decline. To maintain work incentives and to decrease the long-run need for income supplementation, able-bodied male heads of families receiving FAP benefits, and female heads with no pre-school-age children, would be required to register with State employment agencies. Additional training and day care would be provided for those needing these services. The family assistance legislation also proposes an improvement in adult public assistance programs by setting a national minimum income standard for recipients. Payments under old age assistance 2 The benefit is reduced dollar for dollar for income from VA pensions and farm subsidies; welfare income is completely disregarded. 176 THE BUDGET FOR FISCAL YEAR 1971 (OAA), aid to the blind (AB), and aid to the permanently and totallydisabled (APTD) would guarantee recipients a total income of at least $90 per person per month. The legislation also calls for the modification of the more restrictive eligibility provisions of current welfare programs for these categories. To reduce the fast-rising burden of welfare spending on State and local governments, the family assistance proposal would replace present Federal-State matching formulas with a more generous formula for Federal reimbursement of State payments under OAA, AB, and APTD. The proposal also guarantees that no State would have to spend at a rate higher than 90% of its existing program level. Thus, every State would save at least 10% of its anticipated welfare outlays. This relief is expected to total about $500 million in the first full year of operation. Closely related to FAP is the Administration's expanded and revised food stamp program. Major modifications are being made administratively in 1970 to meet the needs of the poor more fully. The Administration's legislative proposal, still pending in Congress, will permit further improvements in 1971. Taken together, FAP and the improved food stamp program would provide significantly improved benefit levels for many poor families. A family of four with no other income would receive a total of $2,464 annually—$1,600 in cash from FAP, and $864 in the form of the food stamp bonus ($1,272 in stamps less a purchase price of $408). Table L-5 shows the impact of Administration proposals on family income for a male-headed family living in one of the 26 States that does not have an AFDC program for unemployed fathers. Table L-5. IMPACT OF FAMILY ASSISTANCE AND FOOD STAMP PROPOSALS ON FAMILY INCOME i Existing benefits Earnings Public assistance 2 Food stamp bonus 3 Family assistance Food stamp bonus $0 0 0 0 0 $696 $1,600 1,600 1,210 $864 $0 720 1,500 3,000 4,000 1 2 3 Proposed benefits 480 384 288 288 460 0 624 480 408 312 Increase in total income $1,768 1,744 1,306 580 24 Data are on an annual basis for a male-headed family of four. For a State with no AFDC program for unemployed fathers. This schedule is now being replaced with one very similar to the proposed benefit schedule. Legislation has been proposed which will extend unemployment insurance coverage to an additional 5.3 million workers, including many low-wage workers greatly in need of protection. Workers with marginal skills will be encouraged to undertake retraining to reduce their vulnerability to unemployment. Abuses that have permitted unwarranted benefits to be collected will be remedied. The economic stabilization effects of unemployment insurance will be increased by automatically extending benefits for up to 13 additional weeks during times of high unemployment. Finally, the financing of the system will be strengthened by increasing the taxable wage base from $3,000 to SPECIAL ANALYSES 177 $6,000 over a period of 5 years. This change will increase revenues and make financing more equitable. Additional social security legislation has been proposed to improve equity under the system. One proposal calls for an increase in the annual amount of earnings that would be exempt under the retirement test from $1,680 to $1,800 to reflect the increase in average wages since the last adjustment. In addition, benefits would be reduced by $1 for every $2 of earnings in excess of $1,800. The current dollar-for-dollar offset of earnings over $2,880 against benefits would be eliminated. Other changes would reduce the benefit computation point from age 65 to age 62 for men (as it is now for women), and increase the widow's benefit from 82J4% to 100% of the husband's primary benefit. This legislation will be effective in 1972. To help finance improvements in income security programs, there must be a continuing effort to discontinue obsolete or duplicative programs. Examples in this budget include proposed legislation to discontinue payment of veterans compensation for cases of arrested tuberculosis and to include railroad retirement income in computing certain VA pension benefits. It is also proposed that the Department of Agriculture terminate the special milk program at the end of the 1970 school year as other food programs which more directly benefit the poor are expanded. These proposals, coupled with legislation placing new restrictions on Federal reimbursement for long-term care under Medicaid, will reduce income security outlays by $331 million in 1971. Recent program developments.—The recently enacted Tax Re- form Act of 1969 includes provisions improving social security benefits. Effective January 1, 1970, old age and survivors and disability insurance (OASDI) benefits were increased by 15%, more than offsetting the erosion in real benefits due to inflation since the last benefit increase (effective February 1968). This benefit increase will result in payment increases of $1.7 billion in 1970 and $4.3 billion in 1971. The maintenance payments made by the Federal-State public assistance programs to the needy who are aged, blind, disabled, or in families with dependent children were substantially altered in 1969 by the implementation of the 1967 amendments to the Social Security Act. The most important changes associated with these amendments were designed to improve work incentives for family heads in the AFDC program. The dollar-for-dollar offset of earnings against benefits (the 100% tax rate 3 on earnings often associated with public assistance) was replaced by a system that disregards earnings of $30 a month and one-third of any earnings in excess of $30 for benefit determination. This change lowers the marginal tax rate for AFDC from 100% to 66%%. This increased inducement to earn was coupled with the work incentive program, which provides training, day care, and other supportive services to AFDC recipients to assist them toward economic independence. Other important changes, dealing primarily with public assistance eligibility, have been brought about by court decisions and new Federal regulations. For example, the courts have eliminated State residency 3 The "tax rate," as used in this Analysis, refers to the proportion of beneficiary income that an income security program takes as an offset against the program benefit. For example, a dollar-fordollar offset of earnings against the benefit constitutes a "100% tax rate" on earnings. In this case, if a family with a monthly benefit of $100 experienced an increase in earnings of $25, the benefit would be reduced to $75. If the program disregards all income in computing benefits, the "tax rate" is 0%. 390-700 O—70 12 178 THE BUDGET FOR FISCAL YEAR 1971 requirements as eligibility criteria. At the direction of the Department of Health, Education, and Welfare, States are now experimenting with an affidavit form of income determination, which may replace the case-by-ease, detailed investigation method. Recent legislation increased benefits paid to the survivors of veterans with service-connected disabilities (dependency and indemnity compensation), effective December 1, 1969. Under the new law, the minimum monthly payment to a widow and two children will rise from $161 to $210, a 30% increase. Two automatic cost-of-living benefit increases of 4.0% and 4.3% were granted by the military retirement program during calendar 1969. The automatic increases for civil service retirees during the year were 3.9% and 4.0%. In enacting the Civil Service Retirement Amendments of 1969, the Congress provided an extra 1% cost-of-living increase to reduce the time lag in the automatic adjustment procedure,4 gave retirement credit for unused sick leave, and improved survivors' benefits. The most significant change, however, altered the salary base for civil service retirement benefit computation from the average for the highest 5 years to the highest 3 years.5 Outlays for these added benefits are estimated to be $63 million for 1970 and $156 million for 1971. These costs wTill be financed primarily by raising both the employer and employee contributions to the civil service retirement trust fund from &%% to 7% of basic pay. The President recently signed the Federal Coal Mine Health and Safety Act, a measure aimed at reducing the incidence of pneumoconiosis (black lung disease) among coal miners and the extent of suffering for its victims. One provision calls for Federal compensation to black lung victims in monthly amounts ranging from $136 to $272. This new compensation program, effective December 1969, will cost $20 million in 1970 and $150 million in 1971. Faced with the task of improving and reforming income security programs, public policymakers and the research community have recognized the need for testing program proposals. Thus, several scientifically designed income maintenance experiments have been undertaken. The first such experiment, a test of a "negative income tax" among poor families headed by male adults in New Jersey, was launched by the Office of Economic Opportunity in 1968. It is designed to test the recipients' behavioral responses to receipt of a need-tested income supplement in terms of work effort, consumption patterns, family stability, and other variables. Since then, other experiments have been started or planned by OEO and the Department of Health, Education, and Welfare to test these and other critical elements of program design and methods for implementing family assistance. Outlays for these projects will total $18 million in 1971. Cash benefit programs.—For the purposes of this Analysis, Federal income security programs are organized by method of payment and program goal. There are two methods of payment: 4 Legislation has been enacted which will add an extra 1 % to automatic cost-of-living adjustments in 5 military retirement pay as well. A similar change in benefit computation for foreign service retirement is now under consideration by the Congress. SPECIAL 179 ANALYSES (1) benefits can be paid in cash without any restrictions on use; or (2) payments can be made in kind, or in cash but only for the consumption of specific items. Thus, programs can offer either unrestricted or restricted assistance. In general, cash benefit programs attempt to provide beneficiaries some assured level of living. It is important to distinguish maintenance levels related to: (1) a former earnings level (income replacement); (2) a minimum income level (income support); or (3) some other measure, such as a presumed future earning capacity (income compensation). Table L-6. CASH BENEFIT PROGRAMS: BENEFIT OUTLAYS AND BENEFICIARIES FOR INCOME REPLACEMENT PROGRAMS Benefit outlays (millions) 1969 actual 1970 estimate Cash benefit programs (income replacement) : Social security: OASI $23,732 $26,356 DI 2,798 2,443 Federal employee retirement systems: Military .___ 2,444 2,857 Civil service 2,192 2,554 Coast Guard. 53 60 Foreign service 13 16 PHS officers 7 9 Judiciary 6 5 1 ESSA officers 1 1 Special annuities (CSC) 1 Federal employees compensation. 95 111 Veterans benefits 2 2 2,899 Unemployment insurance 2,285 1,620 Railroad retirement 1,533 44 Proposed legislation Total, cash benefits for income replacement 34,806 39,334 Number of beneficiaries (thousands) 1971 estimate 1969 actual $29,706 3,191 22,227 2,335 22,846 2,487 23,457 2,637 3,193 2,933 64 18 11 6 1 1 130 2 3,247 1,695 104 692 891 14 2 1 # * 1 23 1 936 978 753 939 14 2 1 * * 1 23 1 1,192 986 825 989 15 2 1 1970 1971 1 23 1 1,277 990 44,302 "Less than 500. Income replacement.—The largest proportion of Federal income security benefits are paid through income replacement programs (about 64% of total outlays in 1971). These benefits are designed as a partial replacement of income lost due to retirement, disability, unemployment, or death of a breadwinner. Eligibility is generally dependent upon work force attachment. Benefit amounts are usually related to prior earnings. Retirement benefits.—The bulk of income replacement payments are made to retirees (see table L-7). Federal programs for retirement include the nearly universal protection offered tc workers by old age and survivors insurance (OASI) under social security, a fed 180 THE BUDGET FOR FISCAL YEAR 1971 erally administered retirement system for the railroad industry, and several retirement systems for Federal employees. With the exception of the systems for the uniformed services (the Armed Services, the Coast Guard, and the commissioned officers of the Public Health Service and the Environmental Science Services Administration) and some very small programs, all retirement systems are financed primarily by employer/employee payroll taxes, although specific statutes do require some contributions from general revenues. The largest of these systems is the old age and survivors insurance system which now protects more than 87 million workers in covered employment. OASI will pay benefits of $21.8 billion to 17 million retirees and their dependents in 1971. The system is funded by payroll taxes levied equally upon employees and employers as a percentage of wages up to the maximum taxable wage of the individual (presently $7,800 a year). Benefit amounts are computed on the basis of the average earnings received over the individual's lifetime work history. However, in order to mitigate the adverse effect of lower wages in the early years of the individual's work history, retirees may begin their work history in 1950 and, in addition, may drop from the calculation the 5 years of lowest earnings. The benefit in 1971 for the average retiree will amount to roughly 35% of his average covered wage. A minimum benefit of $64 a month has been established to provide a higher retirement income for the worker with low wages or a short period of covered employment. Table L-7. CASH BENEFIT PROGRAMS FOR INCOME REPLACEMENT: RETIREMENT BENEFITS, BENEFICIARIES, AND AVERAGE PAYMENTS BY PROGRAM Benefit outlays (millions) 1969 1970 1971 Average monthly payments Number of beneficiaries (thousands) 1969 1970 1971 Retirement benefits: Social security (OASI) $17,318 $19,280 $21,757 16,264 16,609 16,972 Federal employee retirement systems: Military _ Civil service Coast Guard Foreign service PHS officers. Judiciary ESSA officers Special annuities (CSC) Railroad retirement, _ Veterans benefits Proposed legislation Total retirement benefits *Less than 500. 1969 actua $89 2,006 2,354 2,635 1,439 1,679 1,929 60 49 56 12 10 14 8 10 6 5 5 4 1 1 1 555 443 12 1 1 * * 604 467 12 2 1 * * 660 301 491 271 13 348 2 581 1 643 * 3,380 * 462 1 1 1,067 1,120 2 2 31 1 611 1 1 615 1 1 616 1 1 1,164 2 83 21,903 24,549 27,661 70 146 129 1970 $97 1971 $107 325 333 300 327 377 388 630 660 727 798 3,460 3,470 470 505 74 152 132 76 157 133 SPECIAL ANALYSES 181 The railroad retirement system combines social security with a supplementary staff pension system. Benefits are related to wages but, unlike social security, the computation formula includes a factor for length of service. The railroad retirement payroll tax rate may be increased independently, but any social security tax rate increase automatically increases the railroad retirement rate by the same amount. There is a statutory guarantee that a railroad retirement benefit will be at least 10% higher than what the benefit would be if it were computed under the social security formula. Adjustments between the funds are made each year to put the social security system in the same financial position in which it would have been if railroad employment had been covered by the Social Security Act. The transfer of funds takes into account both benefits paid and taxes collected by the railroad retirement system. The railroad retirement system has now reached maturity. The number of beneficiaries, 616,000 in 1971, will remain at this level for several years and then gradually decline. The number of employees covered under the system, 830,000 in 1971, will continue to decline as technology reduces the need for manpower in the industry. Retired Federal employees eligible for benefits will number 1.7 million in 1971 (99% are retired civil servants or military personnel). Payments, reaching $4.7 billion in 1971, are growing at an annual rate of 16%, reflecting beneficiary growth, Federal pay raises, the automatic cost-of-liying increases provided for the two largest programs, and the benefit increases provided by the Civil Service Retirement Amendments of 1969 (see page 178). Disability benefits.—Most of the retirement systems discussed above protect covered employees against income loss due to permanent disability. In addition, Federal employees are entitled to compensation for work-related injuries, and railroad employees are entitled to benefits for temporary disabilities. Disabled military personnel may choose between military disability pay and veterans disability compensation. (Workmen's compensation programs for non-Federal employees, which provide most of the compensation for short-term disabilities, are State programs and have no impact on the Federal budget.) 182 THE BUDGET FOR FISCAL YEAR 1971 Table L-8. CASH BENEFIT PROGRAMS FOR INCOME REPLACEMENT: DISABILITY BENEFITS, BENEFICIARIES, AND AVERAGE PAYMENTS BY PROGRAM Benefit outlays (millions) 1969 1970 1971 Number of beneficiaries (thousands) 1969 Disability benefits: Social security (DI)-$2,443 $2,798 $3,191 2,335 Federal employee ret i r e m e n t systems: Military 429 492 129 546 Civil service 422 493 178 566 Coast Guard 4 2 3 4 Foreign service 1 * 1 1 PHS officers * 1 1 1 ESSA officers * t t t Railroad retirement (permanent disability) 80 82 84 38 Federal employees compensation 90 13 62 72 Railroad unemployment (temporary disability) 56 50 52 25 Proposed legislation 3 6 Total disability benefits 3.497 3.996 Average monthly payments 1970 1971 2,487 2,637 $87 $94 $101 141 187 2 * * * 157 197 2 * * * 277 198 169 582 555 460 291 220 184 633 567 462 290 239 189 651 578 503 37 36 175 185 193 13 13 397 462 577 23 23 186 181 188 1969 1970 1971 4.541 f Less than $500 thousand. * Less than 500. Disability insurance (DI), under social security, is the largest income security program for the disabled. Beneficiaries will total 2.6 million in 1971, and payments are expected to be $3.2 billion. To qualify for DI, a worker must be totally and permanently disabled; i.e., unable to engage in any substantial gainful activity for a period expected to last a year or more. He must also meet specific coverage and insurance requisites set forth in the law. Under these circumstances, his benefit is computed as if he were eligible for old age retirement without having reached age 65. Since his average lifetime work history is of a shorter duration than a retiree's, his benefit will not be depressed by periods of lower wage bases and lower wage levels; consequently, the disability payment for the primary beneficiary averages somewhat higher than the regular retirement payment. Permanently disabled railroad employees under age 65 will number 36,000 in 1971. An employee in the railroad industry may receive a retirement annuity if he is less than 60 years of age, has 20 years of service, and is permanently disabled for work in his regular occupation. He may receive a disability pension at any age if he is perma nently disabled for any regular employment. The disability benefit follows the same formula as the regular retirement benefit, which includes a length of service factor; consequently, the disability benefit will be less than that for retirement. Disability beneficiaries over age 65 are included with retirees in table L-7. 183 SPECIAL ANALYSES The total number of disabled workers benefiting from the systems for Federal employees will grow to 365,000. Average benefits are generally lower than those for the corresponding retiree groups. Survivor benefits,—Federal retirement and disability systems also provide survivors' benefits to protect the families of beneficiaries and covered workers. Out of a total of $8.9 billion for survivors' benefits in 1971, $7.9 billion will be paid under OASI. Another $486 million will be paid to the families of deceased Federal employees, and the remainder will go to survivors of railroad retirement beneficiaries. Table L-9. CASH BENEFIT PROGRAMS FOR INCOME REPLACEMENT: SURVIVOR BENEFITS, BENEFICIARIES, AND AVERAGE PAYMENTS BY PROGRAM Benefit outlays (millions) 1969 actual 1970 est. 1971 est. Number of beneficiaries (thousands) 1969 actual Survivor benefits: Social security (OASI).... $6,415 $7,076 $7,949 5,963 Railroad retirement418 386 329 447 Federal employee retirement systems: Military 9 10 12 7 Civil service 330 382 438 271 Coast Guard. * t t t * Foreign service PHS officers * t t t Judicial survivors * 1 1 trust fund 1 * ESSA officers t t t Special annuities * 1 1 1 (CSC) Federal employees 10 40 34 39 compensation 15 10 Proposed legislationTotal survivor 7,179 7,940 8,906 benefits Average monthly payments 1969 actual 1970 est. 1971 est. 1970 est. 1971 est. 6,237 334 6,485 338 $90 98 $95 104 $102 110 8 9 300 * 110 101 100 583 208 113 112 100 630 208 115 122 100 660 212 364 119 344 137 361 155 113 115 119 283 325 333 285 * 10 fLcss than $500 thousand. •Less than 500. Survivor benefits add to the cost of retirement systems by extending the period of benefit payment beyond the death of the worker. Since survivor benefits can begin before the worker would have actually retired, this extension can be considerable. Consequently, most systems pay lower rates for survivors than for retirees, not only on the assumption that living costs for the family will be lower without the deceased member of the family, but also because of the costs of providing such coverage. The social security system pays benefits to about 2.6 million wives of living retirees and 3.5 million widows and widowers. Social security pays a widow 823/2% of the retiree's benefit. Proposed legislation would increase this ratio to 100%. 184 THE BUDGET FOR FISCAL YEAR 1971 Other Federal retirement systems vary with regard to the amount paid to widows. The civil service system pays the widow 55% of the employee's base annuity, although the retiree must reduce his own annuity in order to provide for survivor benefits. On the other hand, unlike social security, the widow does not have to reach any specific age in order to be eligible for benefits. The military retirement system does not provide survivor benefits at all under the regular system. Instead, a "contingency option" plan is provided by which a member of any of the uniformed services may elect to accept reduced retirement pay during his lifetime. The survivor benefits are financed solely by the elected permanent reductions in retirement pay; there is no Government contribution. However, if the serviceman dies on active duty from service-connected causes, his widow is entitled to survivor benefits under the dependency and indemnity compensation program administered by the Veterans Administration. Unemployment benefits.—Unemployment benefits will be paid to a total of 5.4 million beneficiaries in 1971, or a weekly average of 1.4 million. Unemployment insurance programs, which are administered by the States, are funded primarily by employer taxes paid into a Federal trust fund with separate State accounts. Trust fund payments are also made to the Railroad Retirement Board for unemployed railroad workers, and payments are made from Federal funds for all State beneficiaries who are Federal employees or ex-servicemen. Average weekly benefits vary by State, from $27.98 in North Carolina to $59.55 in Connecticut (for total unemployment, March 1969). Table L-10. CASH BENEFIT PROGRAMS FOR'INCOME REPLACEMENT: UNEMPLOYMENT BENEFITS, BENEFICIARIES, AND AVERAGE PAYMENTS BY PROGRAM Benefit outlays (millions) 1969 actual 1970 est. 1971 est. Unemployment benefits: Workers insured under State laws $2,061 $2, 620 $2,952 Unemployment compensation for Federal employees and ex-servicemen 127 185 200 Railroad unemployment . 41 43 42 Trade adjustment activities 1 1 t Total unemployment benefits.. 2,229 fLess than $500 thousand. •Less than 500. 2,849 3,195 Number of beneficiaries (thousands) Average weekly payments 1969 actual 1970 est. 1971 est. 1969 actual 895 1,153 1,238 $44 51 71 71 19 18 * * 1970 est. 1971 est. $46 $48 47 50 54 18 41 46 45 * 60 77 77 SPECIAL ANALYSES 185 Income support.—Need-related cash benefit programs, offering income support to the poor, are shown in table L - l l . These programs base eligibility and benefits primarily on current income. However, no present program provides income supplementation to all the poor. Instead, these programs focus on specific categories of the poor population: the aged, the blind, the disabled, families with children headed by females, and other groups. The Federal-State public assistance programs constitute the largest income support system. States make payments to the poor under OAA, AB, APTD, and AFDC (17 States also have emergency assistance programs, and 24 States have AFDC for unemployed fathers). The total program is now 57% Federal. The average monthly caseload of 8.9 million in 1969 included an estimated 30% of all poor people. Table L-11. CASH BENEFIT PROGRAMS: BENEFIT OUTLAYS, BENEFICIARIES, AND AVERAGE PAYMENTS FOR INCOME SUPPORT PROGRAMS Benefit outlays (millions) Number of beneficiaries (thousands) 1969 actual 1970 1971 Cash benefit programs (income support) : Public assistance—maintenance payments (Federal share): Old age assistance Aid to the blind Aid to the permanently and totally disabled Aid to families with dependent children Emergency assistance $1,174 52 427 1,714 3 $1,367 $1,457 58 514 61 2,131 Total, public assistance—maintenance payments: (Federal share) (State and local share) 3,370 (2,319) 1969 actual 1970 Average monthly payments * 1971 estimate 2,541 12 2,023 80 710 6,076 13 2,072 82 802 7,098 39 2,094 83 864 7,988 52 4,081 4,647 8,902 10,093 11,081 (2,950) (3,463) 1,307 842 1,339 911 1,304 968 2,018 1,674 1,954 1,745 1,657 1,810 Total, veterans pensions- 2,149 2,250 2,272 3,692 3,699 3,467 Assistance to refugees General assistance to Indians.. Proposed legislation 40 9 52 15 70 18 48 22 61 33 77 36 Veterans pensions: Veterans Survivors Total cash benefits for income support. 1 1970 1971 $70 91 82 42 32 $76 96 86 45 47 $78 99 91 48 40 54 42 57 44 66 45 68 35 71 37 75 39 I 494 5,568 6,398 Averages are based on total payments, including State and local contributions. 576 1969 actual 7,501 SPECIAL ANALYSES 187 Public assistance programs have four basic shortcomings: (1) They fail to cover all the poor; (2) Benefits are very low in some States, with average monthly payments below $20 per AFDC recipient in some cases; (3) Until recently, benefits were structured so that work was discouraged, and family stability is still being undermined by the preferred treatment of the female-headed family; (4) Indignities are often suffered by recipients due to welfare agencies7 efforts to investigate and regulate recipient behavior. The most rapidly growing assistance category under existing legislation is AFDC. In 1971 a monthly average of 2 million families will be helped; 5% of these will be headed by unemployed fathers. The average monthly benefit per recipient will rise from $44.80 to $47.95, partly due to improvements in State payment levels, and in part due to the mandatory earnings disregard effective July 1, 1969. The adult categories, once larger than AFDC, are now smaller as social security has reduced the need for aid to the aged and disabled. Most of the increase in total payments ($3.1 billicn in 1970 to $3.4 billion in 1971) is the result of increases in benefit levels. The newly authorized vendor payments to intermediate care facilities on behalf of recipients are growing rapidly (from $95 million in 1969 to $402 million in 1971). Projections for both AFDC and the adult categories will require revision with congressional action on the family assistance legislation. In August 1969, State and local governments spent $39 million for general assistance to the needy. There is no Federal participation in these programs, which are spotty in coverage and vary widely in payment levels. The Veterans Administration pays pensions to veterans and survivors based on need. Pensions of $1.3 billion will be paid in 1971 to 1.7 million veterans with non-service-connected disabilities (the test for disability decreases in stringency with increasing age). Benefits are based on income, although income is not as strictly defined as it is under public assistance. The survivors of veterans may also qualify for pensions (1.8 million will do so in 1971). The other cash benefit payments based on need will total $88 million in 1971. One of these programs, assistance to Cuban refugees, is growing at a rate of 25%, as the continuing orderly evacuation of political refugees from Cuba brings an increasing percentage who are elderly, infirm, or unskilled. Income compensation.—These programs base benefits on measures other than income loss or need, such as indemnification for impairment of earning capacity. Most of the programs discussed here are designed to aid veterans. 188 THE BUDGET FOR F I S C A L Y E A R 1971 TableL-12. CASH BENEFIT PROGRAMS: BENEFIT OUTLAYS, BENEFICIARIES, AND AVERAGE PAYMENTS FOR INCOME COMPENSATION PROGRAMS Benefit outlays (millions) 1969 1970 1971 Cash benefit programs (income compensation) : Veterans benefits: Disability compensation $2,127 $2,350 $2,431 Dependency and indemnity compensation __ 635 531 588 Life insurance (Fed40 eral funds) _ 36 33 Life insurance (trust 466 453 funds) 443 Special benefits for dis150 20 abled coal miners. -46 Proposed legislation Total, cash benefits for income compensation. _ _ 3,134 3.447 Average monthly payments Number of beneficiaries (thousands) 1969 1970 1971 1969 1970 1971 2,805 2.839 2.869 $63 $69 $71 470 476 476 94 103 111 12 12 13 447 457 470 17 62 200 200 3.676 Veterans disability compensation totaling $2.4 billion will be paid to 2.9 million veterans with service-connected disabilities in 1971. Payments are intended to replace the average earning capacity lost due to varying degrees of disability. Payments under this program vary from $23 monthly for a service-connected disability of 10% to $400 for total disability. Reacting to claims that benefits were inadequate for the totally disabled relative to the lightly disabled, Congress raised the benefit for 100% disability by one-third in August 1968. Survivors of veterans with service-connected disabilities are eligible for dependency and indemnity compensation (DIC). In 1971,476,000 survivors will receive payments of $635 million. Payments are based on the military pay grade of the veteran. Other veterans benefits, primarily from life insurance funds, will total $506 million in 1971. A new compensation program for miners suffering from "black lung" disease was initiated in December 1969. Benefits for eligible miners are determined by the formula used for compensating Federal employees with work-related injuries. However, in the case of Federal employee compensation, benefits are based on actual salaries up to a certain maximum. For a miner, the benefit is based on the salary for a grade 2 civil servant rather than on the miner's actual wage. Benefits in kind.—A wide variety of Federal programs can be considered to provide income security benefits restricted to specific uses (benefits in kind). The coverage of this analysis is limited to those programs that are the most closely related to cash benefit programs. Programs providing assistance in kind are grouped into SPECIAL ANALYSES 189 health care, food and nutrition, and housing programs. Benefit outlays for these programs will total $14.0 billion in 1971, an increase of $2.3 billion over 1970. Health care.—Two health care programs are included in this Analysis. The larger in terms of Federal outlays is the Medicare program. Financed from two Social Security trust funds, the program constitutes a Federal health insurance system for the elderly. Benefits include hospitalization, funded by payroll taxes, and outpatient medical services, financed by enrollee premiums. Virtually the entire aged population is eligible for the former, and over 95% for the latter. Medicare benefit outlays will total $8.4 billion in 1971. The other health care program closely related to income security is the Medicaid program. This program is administered by the States and provides the poor with health services. The States are partially reimbursed from Federal funds, the Federal matching ratio ranging from 50% for a State ranking high in per capita income to 83% for the poorest States. Many Medicaid beneficiaries also receive cash payments from public assistance (about 60% in 1971), but Medicaid eligibility also extends to additional poor people in 28 States. Two States—California and New York—account for half of this program's total benefit outlays, which will reach $5.8 billion in 1971 (of which $3.0 billion will be Federal) under existing legislation. Food and nutrition.—Several food and nutrition programs are considered to be very closely related to cash benefit programs. Two of the largest are the food stamp and commodity distribution programs. The food stamp program, which has become a major vehicle for the Administration's attack on hunger and malnutrition, expands the food purchasing power of needy households by permitting them to purchase food stamps with a redemption value greater than the stamp purchase price. This "stamp bonus" increases as income decreases; under the Administration's proposed legislation, stamps would be provided free to the very poor. This program has grown very rapidly, from only $35 million in 1965 to $575 million in 1970. Outlays are expected to grow to $1.2 billion in 1971. The other major food program aimed at poor families is the commodity distribution program. Under this program, the Federal Government furnishes the poor, as certified by State welfare agencies, with surplus commodities. State and local governments pay most of the administrative costs. This program now exists in 1,169 project areas and another 1,612 such areas have the food stamp program. The remaining 382 areas in the country are expected to have one of these programs by July 1970. Two other Department of Agriculture programs—child nutrition and special milk—help feed about 25 million school children. The special milk program is being phased out in favor of more comprehensive child nutrition efforts. The child nutrition program is being directed more toward aiding needy children (it is expected that almost all needy school children will receive free or reduced price lunches in 1971). An OEO program of emergency food assistance will spend $33 million in 1971 in the process of helping a monthly average of 400,000 people. 190 THE BUDGET FOR FISCAL YEAR 1971 Housing.—Housing programs included in this Analysis provide decent housing for low-income families. The Department of Housing and Urban Development contracts to make periodic payments which reduce the occupancy costs to a level within the means of the poor. Under the low rent public housing program (1971 outlays, $622 million) and the rent supplement program (1971 outlays, $41 million), the payments cover both principal and interest on the bond or mortgage financing the dwelling, and may cover part of the operating costs as well. Public housing is owned or leased by an agency of the local or State government, while rent supplement units are privately owned. Eligibility for admission to a public housing or a rent supplement unit is determined primarily by family income. Specific income standards for public housing are set by the local housing authorities. Every public housing resident pays some level of rent; in most cases the rent varies with income. Families in rent supplement units generally pay rent equal to 25% of income. Table L-13. IN KIND BENEFIT PROGRAMS: BENEFIT OUTLAYS AND BENEFICIARIES BY PROGRAM Benefit outlays (millions) 1969 1970 1971 est. $2,182 $2,537 $2,974 (1,806) (2,478) (2,835) 4,283 4,472 5,255 4,654 1,645 5,225 1,949 6,325 2,078 4,400 9,000 4,500 9,300 4,500 9,700 229 550 260 101 10 547 498 364 101 20 1,200 485 466 U 33 3,224 25,458 20,618 17,000 112 5,424 29,502 24,402 17,000 231 7,472 29,670 24,720 339 5 457 19 622 41 -215 785 12 878 36 978 67 9,975 11,717 14,026 1969 Health care: Public assistance—Medicaid: (Federal share) (State and local share) Medicare: Hospital insurance Supplementary medical insurance. Food and nutrition: Food stamps Removal of surplus commodities Child nutrition Special milk OEO emergency assistance Housing: Public housing Rent supplements Proposed legislation Total, in kind benefits_ Number of beneficiaries (thousands) 1970 1971 381 Program interrelationships.—Individuals are often entitled to benefits from several programs. Table L-14 demonstrates the extent of such overlap. Social security programs, serving as an almost universal base system of income security, have the largest degree of common clientele with other programs. Many recipients of income support programs receive social security, but there is also considerable overlap with Federal retirement programs. Public assistance recipients are also in receipt of benefits in kind. There is a significant overlap with Medicaid, food stamps, commodity distribution, and public housing. Un- 191 SPECIAL ANALYSES fortunately, data are not available to accurately assess the full extent of program complementarity or duplication. Table L-14. EXTENT OF OVERLAP AMONG BENEFICIARIES OF SELECTED INCOME SECURITY PROGRAMS also receiving:1 Program OASDI OASDI Civil service retirement VA pensions Old age assistance AFDC MedicaicL _ Medicare Food stamps _ _ Commodity distribution _ _. Public housing _ 100 40 74 57 8 NA 2 92 NA NA NA Public assistance (OAA, AB, APTD, AFDC) 8 NA NA 100 100 60 NA 60 58 58 2* Based on latest available estimates. Represents overlap in coverage rather than beneficiaries. NA=Not available. Because of program overlap, changes in one program's benefits can affect benefits paid under other programs. The important link in this benefit interrelationship is through each program's treatment of income from other income security programs. In general, the more a benefit is viewed as an earned right (e.g., OASDI, Federal employee retirement) the less likely the benefit depends on other program benefits. The more the benefit is related to need, the more likely it is reduced because of other program benefits. A hierarchy has been established among income support programs. VA pensions disregard all welfare income, public assistance disregards food stamps but taxes VA pensions at 100%. Food stamps taxes both VA pensions and public assistance at 25% on average. Most programs do not relate benefit amounts to the receipt of benefits in kind, due to uncertainty about the valuation of such benefits; however, eligibility for in kind assistance often hinges on eligibility for cash assistance. Federal aid to the poor.—Income security programs constitute a major part of the broad array of Federal resources providing assistance to the more than 24 million poor Americans (those whose incomes fall below the level defined as the poverty line). Despite the strength of our social and economic structure, poverty exists for many in terms of poor housing, poor nutrition, inadequate health care, underemployment and unemployment, lack of marketable skills, and lack of education. The aggregate amount of Federal resources addressed to the needs of the poor has shown a steady increase. The 1971 budget provides $32.9 billion, an increase of $3.2 billion over 1970 and $6.7 billion over 1969 (see table L-15). Most ot this increase is accounted for by programs which provide direct income support for individuals and families whose incomes are below the poverty level. In addition to 192 THE BUDGET FOR F I S C A L Y E A R 1971 direct income assistance, other social programs have focused resources and program activities on the problems of poverty. Table L-15. FEDERAL AID TO THE POOR (In billions of dollars) Category Education __ Employment assistance Health assistanceMaintenance of individuals and families: Income assistance Other maintenance assistance _ Research, demonstration, and other support Total 1969 actual 1970 estimate 1971 estimate 2.2 2.3 1.6 5.3 1.7 5.9 2.7 2.3 6.4 15.1 1.6 0.4 17.1 2.3 0.4 17.8 3.3 0.4 26.2 29.7 32.9 TableL-16. FEDERAL OUTLAYS FOR INCOME SECURITY BENEFITS, BY DEPARTMENT AND PROGRAM Department, agency and program Benefit outlays (in millions of dollars) 1969 Department of Health, Education, and Welfare: Social security: Old-age and survivors insurance Disability insurance Hospital insurance Supplementary medical insurance Public assistance: Maintenance payments Medicaid Assistance to refugees Public Health Service officers retirement Special benefits for disabled coal miners Proposed legislation Total, Health, Education, and Welfare Veterans Administration: Disability and dependency and indemnity compensation. Veterans and survivors pensions Life insurance (Federal funds) Life insurance (trust funds) Other veterans benefits Proposed legislation Total, Veterans Administration Department of Labor: Unemployment insurance (State programs) Railroad unemployment Unemployment compensation for Federal employees and exservicemen Trade adjustment activities Federal employees compensation Total, Labor_ 1970 1971 2,443 4,654 1,645 $26,356 2,798 5,225 1,949 $29,706 3,191 6,325 2,078 3,370 2,182 40 7 4,081 2,537 52 9 20 4,647 2,974 70 11 150 285 38,073 43,027 49,437 2,658 2,149 33 443 2 2,938 2,250 36 453 2 3,0662,272 40 466 2 -52 5,285 5,679 2,061 97 2,620 93 5,794 — 2,952 94 127 * 95 2,380 185 1 111 200 1 130 3,010 3,377 $23,732 193 SPECIAL ANALYSES TableL-16. FEDERAL OUTLAYS FOR INCOME SECURITY BENEFITS, BY DEPARTMENT AND PROGRAM—Continued Benefit outlays (in millions of dollars) 1969 actual Department of Defense: Military retirement. _ _ Total. Defense Department of Agriculture: Food stamps Removal of surplus commodities Child nutrition Special milk ___ . _ _ . . _ _ .__ Total, Agriculture Department of Housing and Urban Development: Public housing _ ___ Rent supplements ___ Total, Civil Service Commission 2,444 2.857 3,193 229 550 260 101 547 498 364 101 1,200 485 466 17 1.140 1,510 2,168 344 476 663 2.192 1 2,554 1 2,933 1 2.193 2,555 2,934 1,533 1,620 44 1,695 104 1,533 1,664 1,799 53 60 64 _. 53 60 64 __ 10 20 33 10 20 33 13 16 18 13 16 18 9 15 18 9 15 18 5 6 6 _. 5 6 6 _ 1 1 1 1 1 53,483 60,896 69,505 _ _ Total, Railroad Retirement Board _ Total, Transportation - Office of Economic Opportunity: Emergency assistance. Total, OEO Department of State: Foreign service retirement _ Total, State Department of the Interior: General assistance to Indians Total, Interior __ The Judiciary: Judges retirement and survivors annuity fund Total, Judiciary Department of Commerce: ESSA officers retirement _ _ Total, Commerce _ Total, Federal outlays *Lc«« than $500 thousand. 3i90-7O0 O—70 3,193 622 4] Department of Transportation: Coast Guard retirement 2,857 457 19 _ Railroad Retirement Board: Railroad retirement Proposed legislation 2.444 339 5 _. . . . Total, Housing and Urban Development Civil Service Commission: Civil service retirement Special annuities (CSC) 13 1971 1970 1 SPECIAL ANALYSIS M FEDERAL PROGRAMS FOR THE REDUCTION OF CRIME The objective of the Federal crime reduction program is to reduce the rate of criminal law violations in our Nation, and thereby limit the great economic and social costs of crime. To reach this objective the Federal Government will continue to increase assistance to State and local governments, undertake a wide range of programs designed to improve the methods and techniques of crime prevention and law enforcement, and maintain the high quality of justice necessary to the functioning of a free society. These programs will (1) improve enforcement of criminal laws at all levels of government, and thereby increase the perceived risk to criminals of detection and punishment for criminal acts; (2) develop a system of corrections which reforms the behavior of individuals rather than merely restricts their liberty for a period of time; (3) upgrade the administration of criminal justice so that those accused of crime are provided a prompt and fair trial; and (4) increase our understanding of the nature and extent of crime. ACCOMPLISHMENTS OF THE PAST YEAR The accomplishments of the past year reflect the very high priority the administration has placed on combating crime and improving our entire system of criminal justice. Events of particular importance during the past year were: • A strong Administration commitment to an intensive effort to rid our Nation of the corrupting influence of organized crime. The new Administration requested an addition of $25 million to the 1970 budget for this purpose. The President transmitted a special message to Congress on organized crime calling for new legislation to attack the problem, and indicating his intention to increase the number of Federal organized crime strike forces to 20 in 1971. • Major new initiatives to control the abuse of narcotics and dangerous drugs. The strong commitment of the President to the achievement of drug abuse control was evidenced by (1) a successful effort in the Nation's Capital to destroy a major criminal system of drug distribution; (2) development of a program to apply similar efforts in other major cities; (3) an intensification of the Nation's program to control illegal entry of narcotics across our southern borders; and (4) a 100% expansion in the number of agents involved in enforcement of smuggling laws. The President transmitted a special message to the Congress on control of narcotics and dangerous drugs indicating that the Federal Government would meet the drug problem with all techniques available, including public education, treatment, enforcement, assistance to State and local officials, and international cooperation. • A landmark statement of Presidential policy on the reform of the Federal Correctional System. On November 13, 1969, the Presi194 195 SPECIAL ANALYSES dent issued a 13-point program for the modernization and reform of Federal corrections which calls for particular emphasis on programs for juveniles, narcotics addicts, alcoholics, and the mentally ill; expansion of community-based programs; and for much better evaluation of correctional programs and research looking toward the development of more effective rehabilitation. The President has asked the Attorney General to develop a 10-year plan for reforming Federal correctional activities. • Major new developments in intergovernmental cooperation including (1) initiation of intergovernmental organized crime strike forces and planning for an intergovernmental narcotics enforcement task force; (2) expansion of the FBI's National Crime Information Center to service 48 of the 50 States; (3) development by 10 States through the Law Enforcement Assistance Administration (LEAA) of a demonstration criminal justice information and statistics system (Project Search) which may become a prototype for a nationwide system; (4) initiation,of a six-State project receiving LEAA funds and technical assistance from the Criminal Division of the Department of Justice to develop a prototype computerized system for storage and retrieval of organized crime intelligence data; (5) special emphasis on the crime problems of the District of Columbia including proposals for law reforms, court reorganization, and joint efforts to combat the narcotics traffic in the Nation's Capital; and (6) implementation of the Law Enforcement Assistance program which is designed as a partnership effort among Federal, State, and local governments to plan and carry out a comprehensive nationwide reform of law enforcement and criminal justice activities. Table M-1. FEDERAL OUTLAYS FOR THE REDUCTION OF CRIME BY AGENCY * (in thousands of dollars) Outlays Agency The Judiciary 2 _ Office of Economic Opportunity _ _. Department of Agriculture Department of Health, Education, and Welfare. __ Department of Housing and Urban Development. Department of the Interior Department of Justice _ Department of Labor Post Office Department Department of Transportation Treasury Department Atomic Energy Commission _ General Services Administration National Aeronautics and Space Administration. _ Veterans Administration Other Independent Agencies _ Total Federal outlays. 1 2 1969 actual 1970 estimate 1971 estimate 272 10,663 212 55,510 5,095 3,602 60,167 13,660 18,565 598,942 4,900 27,904 11,663 125,578 159 4,377 1,172 15,457 590 58,054 11,295 3,810 75,765 23,600 19,713 830,428 6,100 36,509 12,475 141,903 149 13,333 1,238 22,501 465 658,353 947,341 1,257,338 48,485 7,446 3,158 45,433 526 15,523 390,315 2,839 31,899 10,995 90,344 243 Does not include Department of Defense or nondomestic outlays for crime reduction. Outlays estimated by the Bureau of the Budget. 196 THE BUDGET FOR FISCAL YEAR 1 9 7 1 1971 BUDGET HIGHLIGHTS In 1971 total Federal outlays for the reduction of crime will amount to over $1,257 million. This compares with $947 million estimated to be spent in 1970 and is 91% more than outlays for crime reduction in 1969. Recognizing that the heaviest burden of enforcing our criminal laws rests upon State and local governments, major emphasis in 1971 will be given to programs for improving State and local criminal justice systems and for assisting communities in preventing crimes and delinquency. Of the $1,257 million of 1971 Federal outlays reported in this analysis, $518 million, or 41%, will be for programs or projects which assist State and local governments in their crime reduction efforts. Outlays of the Law Enforcement Assistance Administration are expected to total $368 million in 1971, an increase of $190 million over 1970. Budget authority of $480 million is requested for this program in 1971. All States have prepared comprehensive law enforcement improvement plans under the LEAA's block grant program and implementation of a wide range of planned projects will occur in 1970 and 1971. Numerous projects for the prevention of crime funded under the Model Cities program will supplement LEA A funded programs in meeting the crime problems of certain urban areas. Other major highlights of the 1971 Crime Reduction Budget include: • $43 million for crime research and statistics which is a 60% increase of funds spent for these purposes in 1970 and a 221% increase over such outlays in 1969. • An 80% increase over 1970 in funds for crime prevention including public education, juvenile delinquency prevention, and narcotic addict rehabilitation. o The expenditure of $56 million for special Federal enforcement against organized crime, and $18 million to support the efforts of State and local governments in combating organized crime. This compares with $24 million spent for all such programs in 1969. • $5 million in new budget authority for further construction of a consolidated Federal Law Enforcement Training Center at Beltsville, Md., to provide 13 Federal police and investigative agencies with modern facilities for basic and advanced training, and $14 million to complete construction and equip a new FBI National Academy which will provide greatly expanded programs of training for State and local law enforcement personnel. • Outlays of $177 million to carry out Federal correctional programs, and assist State and local correctional systems. A major new prison and jail construction program will be undertaken in 1971 and treatment and rehabilitation projects will be expanded both in prisons and in the community. CRIME KEDUCTION PROGRAM BY ACTIVITIES The budget outlays reported under this special analysis cover all domestic Federal programs directly related to or closely associated with crime reduction, except outlays associated with programs of the Defense Department.1 The analysis includes certain programs of the 1 The Bureau of the Budget estimate of Department of Defense outlays for crime reduction is $500 million in 1969. 197 SPECIAL ANALYSES Judiciary even though the basic function of the Judiciary is to assure the administration of justice rather than to reduce crime. It excludes general social programs (even though such programs may indirectly reduce crime) unless they are clearly within the context of crime reduction or prevention (e.g., vocational training of prisoners; treatment of juvenile delinquents). Also, the analysis does not include background investigations for employment, administrative inspections, guarding functions, or investigations primarily of a regulatory nature which may in rare cases result in the application of criminal sanctions. Where activities involve both civil and criminal proceedings (e.g., operation of courts) an allocation of outlays to the criminal function has been estimated by the Bureau of the Budget. Table M-2. FEDERAL OUTLAYS FOR THE REDUCTION OF CRIME BY MAJOR PROGRAM AND SELECTED ACTIVITY * (in thousands of dollars) Outlays Major program and selected activity 1969 actual 1970 estimate 1971 Crime research and statistics: Criminal justice statistics Research and developmentProgram total Reform of criminal l a w s . . 1,691 11,752 6,497 20,423 10,788 32,421 13,443 26,920 43,209 346 1,037 1,452 2,485 25,242 14,911 5,142 13,616 29,147 35,655 25,367 30,614 48,080 61,297 46,850 47,780 103,785 186,841 197,762 122,493 12,728 23,242 209,279 151,117 17,153 50,075 230,967 163,191 22,741 55,924 356,225 427,624 472,823 5,170 8,161 14,717 2,050 17,036 1,700 22,206 4,750 640 187 6,826 57,898 4,377 41,627 12,230 6,900 205 13,467 93,945 5,049 59,657 31,813 17,800 190 53,739 138,224 236,638 Services for prevention of crime: Public education Alcoholic and addict rehabilitation Prevention and control of juvenile delinquency. _ Other community services for crime reduction Program total Federal criminal law enforcement: Enforcement in support of Federal systems General Federal law enforcement Federal police Specialized activities against organized crime Program total Law enforcement support: Support of Federal law enforcement Assistance to States and localities for: Intelligence and information systems Education and training of enforcement officers Laboratory support General police activities Control of civil disorders _ __ Combating organized crime Other Program total See footnotes at end of table. 198 THE BUDGET FOR FISCAL YEAR 1971 Table M-2. FEDERAL OUTLAYS FOR THE REDUCTION OF CRIME BY MAJOR PROGRAM AND SELECTED AGENCY 1 (in thousands of dollars)-Con. Outlays Major program and selected activity 1969 actual Administration of criminal justice: Conduct of Federal criminal prosecutions _. Operation and support of Federal court systems 2 Assistance to States and localities for improved administering of justice . Other supporting programs _ __ Program total . . Rehabilitation of offenders: Operation of Federal correctional institutions . Federal probation, parole, and community treatment Federal inmate education and training Assistance to States and localities for improved correctional progress Other programs supporting Federal corrections Program total _ __ _ Planning and coordination of crime reduction programs. Total Federal outlays 1 2 1970 estimate 1971 estimate 18,827 43,875 22,538 52,964 25,002 55,023 1.036 4,800 9,089 4,951 25,116 5,310 68,538 89,542 110,451 71,082 13,830 4,194 79,373 15,730 5,316 90,336 16,963 7,248 11,211 5,065 29,555 5,963 56,083 6,694 105,382 135,937 177,324 12,900 24,272 28,600 658,353 947,341 1,257,338 Does not include Department of Defense or nondomestic outlays for crime reduction. Outlays estimated by the Bureau of the Budget. Crime research and statistics.—Crime research and statistics includes the various Government activities designed to produce statistics and knowledge concerning crime, criminals, and the criminal justice system, and to develop improved methods and techniques for the operation of the system. • The Department of Justice (LEAA) will continue development of a comprehensive criminal justice statistics and information service. Included will be a prototype system for exchanging criminal history information among States, statistics on victimization, assessments of the economic impact of crime, and a survey of the Nation's jails. The FBI will continue to maintain a nationwide system of reported crime data and publish this information periodically. • The National Institute of Mental Health will support an expanded program of basic and applied research on the nature and causes of crime and delinquency. The Institute will develop better knowledge of a broad range of aggressive, violent, and destructive behavior. • The Department of Justice (LEAA) will develop improved detection and apprehension techniques including nighttime viewing devices, voice print equipment and better police radio and communications gear. The FBI will further develop automated fingerprint identification techniques and the Bureau of Narcotics and SPECIAL ANALYSES 199 Dangerous Drugs will improve its program to identify and test new dangerous substances susceptible to abuse. • The AEC will develop applications of neutron activation analysis to problems of forensic medicine and science, and NASA will fund a variety of projects for planning and evaluating police patrol and detection techniques. • Research on improved correctional practices will be undertaken by both the Bureau of Prisons and NIMH. LEAA will provide funds for similar research in the States. LEAA, NIMH, and the Federal Judicial Center will study ways to improve court procedures and methods. Reform of criminal laws.—Criminal law reform includes government efforts to improve the effectiveness of the Nation's laws and assure that they accurately reflect the values and standards of society. • Drafting and presenting many of the Federal Government's criminal legislative proposals is a principal Department of Justice responsibility. The Department has developed and the Congress is now considering major reforms in narcotic and drug laws, and important changes in the criminal laws of the District of Columbia and in the structure and organization of its courts. • The National Commission on Reform of Federal Criminal Laws will complete its study by November 1970, and recommend to the President and the Congress a revision of the entire Federal criminal code. • The Bureau of Narcotics and Dangerous Drugs will foster enactment by the States of a Uniform Controlled Dangerous Substances Act. A revised draft has been completed and is being discussed with interested groups. • The Law Enforcement Assistance Administration will provide over $1 million in 1971 to aid State and local activities connected with criminal law reform. Prevention of crime.—Crime prevention includes government efforts to limit or render less probable the commission of criminal acts by means other than direct enforcement or general correctional activities. Included are public education, alcoholic and addict rehabilitation, treatment of juvenile delinquents, and projects to improve policecommunity relations. • Total Federal outlays for juvenile delinquency prevention will exceed $61 million in 1971. Of this amount $13 million will be spent under the Juvenile Delinquency Prevention and Control Act of 1968 for rehabilitation and community-based prevention services to juveniles. In 1969 planning grants were made to 37 States, and by 1971 it is anticipated that all States will have comprehensive juvenile delinquency prevention plans. Seventeen preventive service projects will increase to 46 new projects in 1970 and 55 in 1971. LEAA will also provide $32 million for State and local juvenile delinquency projects in 1971. HEW (Office of Education) will devote $16 million for improving education for institutionalized delinquent children. • A variety of crime prevention projects will be undertaken by communities with funds of the Department of Housing and Urban 200 THE BUDGET FOR FISCAL YEAR 1971 Development (Model Cities). Projects will include halfway houses and foster homes for juveniles, improved juvenile probation services, addiction treatment centers, and police-community relations activities. • Twenty-nine VA hospitals operate alcoholism treatment units. In 1971 the VA is requesting $1.3 million for nine additional alcoholism units. The units are encouraged to also treat veterans with drug abuse problems. • OEO, NIMH, and the Bureau of Prisons will provide treatment for narcotic addicts. OEO supports seven projects offering community-based rehabilitation services to 8,000 persons. During 1970 and 1971 OEO will explore new ways of dealing with addiction in poverty communities. NIMH will provide primarily community-based treatment for an estimated 15,000 narcotic addicts in 1971. The Bureau of Prisons will provide treatment within prisons and aftercare in the community following release from prison for over 1,100 addicts. • A 3-year drug information program will be initiated by HEW, Justice, and the Defense Department utilizing radio, TV and printed media. Federal criminal law enforcement.—Law enforcement involves direct Federal Government efforts to detect, identify, and apprehend violators of criminal laws. Representative programs include criminal investigations, policing of certain Federal areas, and special concerted activities against organized crime. (See workload tables following table M-3.) • Enforcement in support of Federal systems will require $231 million of outlays in 1971, an increase of 10% over 1970 and a 17% increase over 1969. These activities include enforcement of internal revenue, currency, postal, customs, immigration, and selective service laws. • General Federal law enforcement activities will require outlays of $163 million in 1971, an increase of 8% over 1970, and 33% over 1969. Activities include enforcement of criminal laws relating to narcotics and drugs, civil rights, conservation, and investigations of bank robberies and thefts from interstate commerce. • Federal police activities are conducted in certain areas in the National Park Systems, on Indian reservations and within other areas of Federal responsibility. Agencies with principal responsibilities are the Interior and Treasury Departments. The outlay increase in 1971 for police activities results primarily from the establishment within the Secret Service of an Executive Protective Service which will, among other duties, extend greater protection to foreign diplomatic missions. • Direct Federal outlays for combating organized crime will be $56 million in 1971, an increase of 141% over funds spent for this purpose in 1969. Federal agencies most involved in this program are Internal Revenue Service, FBI, Justice's Criminal Division, U.S. attorneys and U.S. marshals, Bureau of Customs, Secret Service, and the Labor and Post Office Departments. SPECIAL ANALYSES 201 Law enforcement support.—This includes Federal efforts to provide or improve activities which support or upgrade Federal, State, and local police and investigative agencies. • Of the total Federal outlays in 1971 for activities supporting law enforcement, $15 million will be for support of Federal enforcement, and $222 million for support of State and local enforcement. The principal channel for funding State and local support programs will be the Law Enforcement Assistance Administration in the Department of Justice. • A number of Federal agencies will participate in providing training for State and local enforcement officers. LEAA funds totaling $62 million will go for State- or local-administered police training in 1971. The Office of Education expects to fund enrollment of 115,000 persons in vocational education classes in law enforcement in 1971. The Veterans Administration plans to provide financial assistance to 24,000 veterans participating in law enforcement training on the job or in school. BNDD will provide training on drug enforcement to over 22,000 police officers in 1971, and the FBI will open a new national academy which will provide training to 3,000 officers annually. In its field training program, the FBI participated in over 7,800 training courses attended by over 233,000 officers during the past year. • LEAA will provide funds for loans to full-time students and inservice officers in programs leading to college degrees. As many as 100,000 students will be aided in 1971. Administration oj criminal justice.—This category includes the preparation and prosecution of criminal cases, operation of court systems, trial of cases, provision of defense counsel in certain cases, and related and supportive activities. • During fiscal year 1969 there were (excluding transfers) 33,585 criminal cases commenced in U.S. district courts, compared with 30,714 in 1968. The district courts terminated 30,578 criminal cases in 1969 as compared with 29,492 in 1968. As of June 30, 1969, there were 17,770 pending criminal cases in district courts as compared with 14,763 pending in 1968. • The Federal Magistrates Act will be in full effect by November 1971. U.S. magistrates will have powers beyond those of U.S. commissioners, and may assist judges in pre-trial or discovery proceedings and review applications for post-trial relief of convicted persons. • Legal representation will continue to be provided Federal criminal defendants who cannot otherwise afford to retain counsel. Outlays for this purpose will exceed $4 million in 1971. Rehabilitation of ofenders.—These programs include government custody and rehabilitation of criminal offenders. Specific projects include the supervision and operation of correctional institutions, inmate and offender treatment and training programs, and supportive functions. • Outlays for supporting and upgrading correctional and rehabilitation programs will exceed $177 million in 1971, an increase of 30% over 1970 and 68% over 1969. Of the total, over $56 million will support correctional programs of State and local governments. 202 THE BUDGET FOR FISCAL YEAR 1971 • A major prison and jail construction program will be initiated in order to modernize prison facilities and build new jails within multipurpose facilities providing diagnostic services and treatment within the community. • Treatment of offenders in the community will be emphasized. During 1971 the Bureau of Prisons will operate 16 community treatment centers servicing an estimated 2,000 persons. • During 1971 the Bureau of Prisons will provide vocational training for 10,000 Federal inmates (compared with 6,200 in 1969). • The Department of Labor will train approximately 2,300 inmates of State correctional institutions in various occupational shortage areas at a cost of $3 million in fiscal year 1971 as well as in 1970. • OEO will continue an experiment to provide college preparatory courses for prison inmates and post-release assistance to former inmates on the campus. • The Office of Education will provide basic education for over 26,000 inmates in State and local institutions in 1971. Planning and coordination of crime reduction programs.—Included are Federal support of State and local planning and coordination of crime reduction activities. • The Justice Department, HEW, and HUD all fund major programs which are devoted wholly or in part to supporting local efforts to prevent crime. It is essential that these programs be carefully planned and coordinated at each level of government. Funds are made available under these programs for comprehensive State and local planning and coordination. At the Federal level the Department of Justice (under Executive Order 11396) is responsible for effective program coordination. Table M-3. FEDERAL OUTLAYS FOR THE REDUCTION OF CRIME BY MAJOR PROGRAM AND AGENCY i (in thousands of dollars) Outlays Major program and agency 1969 actual 1970 estimate 1971 estimate Crime research and statistics: The Judiciary 2 Department of Health, Education, and Welfare.. Department of the Interior Department of Justice Post Office Department Department of Transportation Atomic Energy Commission National Aeronautics and Space Administration _ Total 6,413 196 519 243 272 78 6,216 10 18,266 368 651 159 1,172 33,883 262 13,443 26,920 43,209 134 212 747 290 27 1,260 165 346 1,037 Reform of criminal laws: Department of the Interior.. Department of Justice Other independent agencies _ Total. nd of table. 146 6,400 12 1,119 149 1,238 1,452 203 SPECIAL ANALYSES Table M-3. FEDERAL OUTLAYS FOR THE REDUCTION OF CRIME BY MAJOR PROGRAM AND AGENCY 1 (in thousands of dollars)—Continued Outlays Major program and agency Services for prevention of crime: Office of Economic Opportunity Department of Health, Education, and Welfare. __ Department of Housing and Urban Development. Department of the Interior Department of Justice Post Office Department Department of Transportation Veterans Administration Total. Federal criminal law enforcement: Department of Agriculture Department of the Interior Department of Justice Department of Labor Post Office Department Department of Transportation. _ Treasury Department Other independent agencies Total . Law enforcement support: Office of Economic Opportunity Department of Health, Education, and Welfare. Department of the Interior Department of Justice Post Office Department Department of Transportation Treasury Department General Services Administration Veterans Administration Total. Administration of criminal justice: The Judiciary 2 Department of Health, Education, and Welfare. Department of the Interior Department of Justice Department of Transportation Total. Rehabilitation of offenders: The Judiciary 2 Office of Economic Opportunity Department of Health, Education, and Welfare. Department of the Interior Department of Justice _. Department of Labor _ Total. See footnotes at end of table. 1969 actual 5,400 1970 estimate 1971 estimate 8,400 59,916 23,300 475 51 843 3,700 2,600 45,627 13,400 471 36,402 60 1,125 4,100 47,780 103,785 186,841 3,158 3,602 15,349 244,858 1,900 26,645 9,842 3,810 16,372 32,293 266 444 4,783 13,397 208,647 31,083 9,596 90,344 86,527 73 1,150 7,000 264,895 3,100 35,382 125,128 300 10,161 138,803 300 356,225 427,624 472,823 581 1,335 110 1,636 1,554 117,866 831 43 110 2,136 1,429 200,194 450 4,377 896 43,360 569 35 792 43 6,963 11,357 3,100 13,333 15,501 53,739 138,224 236,638 36,573 759 374 30,830 2 42,146 860 591 44.198 900 630 45,943 2 64,721 2 68,538 89,542 110,451 11,845 1,465 5,313 412 13,286 13,710 2,385 5,828 578 2,785 83,508 2,839 110,860 3,000 6,413 768 150,648 3,000 135,937 | 177,324 105,382 ! 204 THE BUDGET FOR FISCAL YEAR 1971 Table M-3. FEDERAL OUTLAYS FOR THE REDUCTION OF CRIME BY MAJOR PROGRAM AND AGENCY 1 (in thousands of dollars)—Continued Outlays Major program and Agency 1969 Planning and coordination of crime reduction programs: Department of Housing and Urban Development Department of the Interior. Department of Justice __ __ __ 260 12,640 260 12 24,000 28,300 12,900 24,272 28,600 658,353 947,341 1,257,338 Total Total Federal outlays 1 2 1971 1970 300 Does not include Department of Defense or nondomestic outlay for crime reduction. Outlays estimated by the Bureau of the Budget. SELECTED CRIME REDUCTION DATA (dollars in thousands) 1968 Federal outlays for crime reduction: Federal crime reduction outlays assisting States and localities... Federal crime reduction outlays for reduction of Federal crimes _ Total Federal outlays for reduction of crime Federal personnel: Full-time Federal criminal investigators _ _ U.S. attorneys and assistant attorneys (man-years on criminal workload) Attorneys—Criminal division (man-years) U.S. district court judgeships State and local crimes: 3 Serious crimes recorded (UCR—table 2) Violent crimes recorded (UCR—table 2) Rate of serious crimes per 100,000 inhabitants (UCR—table 2) Rate of violent crimes per 100,000 inhabitants (UCR—table 2) Percent index crimes cleared by arrest (UCR—table 13) Percent found guilty of persons charged by police (UCR—table 15) _. Federal investigations: FBI, investigative matter received _ _ _ Post Office, criminal caseload _ _ IRS, tax fraud investigations.. ___ Bureau of Customs (cases closed) _ _ Secret Service (cases closed) _ Disposition of Federal criminal matters: Investigative matters presented for prosecutive decision—prosecution declined _ _ Federal criminal cases commenced i Federal criminal cases terminated * _ __ Federal criminal cases pending 4 _ 5 Federal criminal cases pending over 6 months __ Federal criminal defendants convicted _ See footnotes at end of table. 0) (l) $530,643 2 1969 $103,739 554,614 658,353 12,618 480 168 341 2 12,818 560 168 341 4,466,600 588,800 2,235 295 20.9 66.7 820,830 181,153 9,372 27,989 87,197 0) 0) 0) 0) (l) 0) 859,666 200,812 8,135 28,175 79,892 0) 30,714 29,492 14,763 4,340 26.660 83,483 33,585 30,578 17,770 5,078 29,450 205 SPECIAL ANALYSES SELECTED CRIME REDUCTION DATA (dollars in thousands)—Continued 1968 Corrections: Average Federal jail population Average Federal prison population Court commitments to Federal institutions Average Federal prison sen tences (months) Persons under supervision of Federal Probation System (end of year) 6_ Federal paroles granted _ Warrants issued for violation of conditions of release from prison Executive clemency petitions granted 3.438 19,677 11.653 44.5 36,785 5.840 2,891 16 1969 3,866 20,239 11,162 45.2 36,985 5,445 2.521 1 Not available. 2 CSC jobs classified in series 1811 as of October 31. From uniform crime reports—calendar year 1968 (FBI). Excludes transfers. Excludes pending cases of fugitives. Includes probation, parole and mandatory release; estimate by the Bureau of the Budget. 3 4 5 6 SPECIAL ANALYSIS N FEDERAL HOUSING PROGRAMS COVERAGE AND SCOPE OF THE ANALYSIS A wide variety of Federal programs and activities have a direct or indirect impact on the production of housing. These include programs of direct Federal construction of housing (primarily for civilian employees or military personnel), basic involvement in mortgage financing, and subsidies for housing for low- and moderate-income families. In addition, major activities outside the Federal budget, involving both Government-sponsored enterprises and private investment, occur as a direct result of Federal programs and policies. This analysis summarizes the impact of these Federal programs and activities. Programs are included if they: • Assist the production or sale of family housing; • Assist in preventing deterioration of the existing housing stock; or • Provide certain other types of indirect support for housing production.1 RELATIONSHIP OF THE ANALYSIS TO THE ANNUAL HOUSING GOALS REPORT Section 1603 of the Housing and Urban Development Act of 1968, as amended (42 U.S.C. 1441c) requires an annual report to the Congress on progress in the production of new or rehabilitated housing and in the reduction of substandard housing. This special analysis is consistent with the data being developed for the Annual Housing Goals Report which will be submitted by February 15, 1970. The focus of the two differs substantially, however. This analysis concentrates on the financial and budget impact of Federal and Federally assisted housing activities. The Annual Housing Report, on the other hand, discusses the entire housing sector and the factors affecting it, including both Federal and non-Federal activities. The Annual Housing Report uses housing starts as a measure of production. Since starts are not readily translated into budget impact, this analysis concentrates on federally assisted financial commitments (which usually precede starts) and on outlays (which usually follow completions). 1 Activities excluded from this analysis include: Housing allowances which are paid to civilian employees, military personnel, or beneficiaries of income maintenance programs; the production of dormitories or barracks or housing outside the United States and its possessions; and programs which assist housing only by providing land and supporting facilities. 206 207 SPECIAL ANALYSES SUMMARY Federal budget outlays for housing excluding the impact of asset sales are expected to total $3.6 bilSon in 1971, compared to $2.8 billion in 1970 and $1.8 billion in 1969. The change from 1970 to 1971 is primarily a reflection of increased outlays for housing for low- and moderate-income families, consisting of: • An increase of $294 million in payments on outstanding long-term subsidy contracts supporting housing for low- and moderateincome families; and • A $615 million increase in insured loans originated in rural areas for subsequent sale by the Farmers Home Administration. The impact of these increases, however, is more than offset by a $1.9 billion increase in the sale of financial assets and other reductions, with the result that net budget outlays (after taking account of these sales) decline from $1.9 billion to $0.7 billion. In addition to activities included within the Federal budget totals, Government-sponsored enterprises (the Federal National Mortgage Association and the Federal Home Loan Banks) are expected to borrow $6.7 billion for investment in housing, compared to $10.3 billion in 1970. This decline reflects the anticipation of somewhat easier credit conditions, permitting a major growth in mortgage credit to be financed with less support from these institutions. This is reflected also in the $22 billion total which is estimated to be forthcoming from private investors for federally assisted housing programs, a marked increase from the $14 billion estimated for 1970. Table N-1. S U M M A R Y OF FEDERAL H O U S I N G P R O G R A M S (in millions of dollars) 1969 actual Budget outlays for housing programs, excluding proceeds from sale of financial assets Less: Proceeds from sale of financial assets Net budget outlays for housing programs Federally assisted private investment in housing Borrowings by Government-sponsored enterprises included above. 1970 estimate 1971 estimate 1,842 -581 2,798 -936 3,593 -2,861 1.261 1,862 732 12,276 (3,829) 13,617 (10,282) 22,102 (6,741) 208 THE BUDGET FOR FISCAL YEAR 1971 Table N-2. BUDGET OUTLAYS FOR HOUSING PROGRAMS (in millions of dollars) 1969 actual 1970 estimate Budget outlays for housing by agency: Department of Housing and Urban Development. Department of Defense Department of Agriculture Veterans Administration Federal Savings and Loan Insurance Corporation. Small Business Administration Other agencies Total. 876 415 15 194 -289 -1 51 1.261 870 435 341 202 -154 71 1971 estimate 1,203 449 -625 -272 96 -117 11 84 1,862 732 Financial asset sales included abore: Department of Housing and Urban Development. Department of Agriculture Veterans Administration Total. Budget outlays for housing by type of programs: Guaranteed or insured financing Direct Federal financing without subsidy Subsidized housing for special groups: Financing combined with subsidy Subsidy without Federal capital investment Assistance to sponsors of housing for low- and moderateincome families _ Federal construction or acquisition of housing Preventing deterioration of existing housing Research and development on housing Other assistance for housing Total. 580 1 50 825 100 61 2,235 526 581 936 2,861 -168 117 -14 125 -1,336 -56 459 358 687 495 739 789 13 215 110 8 150 21 223 120 10 197 35 221 140 20 178 1,261 1,862 732 Units completed.—In combination, Federal housing programs are expected to assist in the completion for occupancy of 989,000 units of new or substantially rehabilitated housing in 1971, compared with 698,000 and 806,000 units in 1969 and 1970, respectively. In addition, these programs will facilitate the sale in 1971 of an estimated 1,018,000 units of existing housing, about the same as in 1969 and 1970. Of the new or rehabilitated units, 418,000 in 1971 will be subsidized for lowand moderate-income families, compared with 151,000 in 1969 and 244,000 in 1970. Units committed.—The completion or sale of a unit frequently follows by lengthy periods the first commitment on the part of the Federal Government affecting that unit. For example, the agreement to insure a mortgage or provide a subsidy for a multifamily unit may predate by 18 months to 3 years the time when that unit is ready for occupancy. This lag reflects the time required to plan and construct the project. It is commonly much shorter for single-family homes. Because of this lag, the units made available for occupancy in any year largely reflect commitments made by the Government in prior years, and commitments made in any year will result in units becoming available in subsequent years. In 1971, the Federal Government expects to make commitments to assist a total of 1,214,000 units of new and rehabilitated housing, including 545,000 subsidized units 209 SPECIAL ANALYSES for low- and moderate-income families. This represents a major increase over the 451,000 subsidized units committed in 1970 and the 225,000 units committed in 1969. Commitments to assist the sa e of existing houses are expected to total 1,309,000 in 1971, compared to 1,304,000 in 1969 and 1,220,000 in 1970. Of the 1971 total, 52,000 represent subsidized units for low- and moderate-income families, compared to 51,000 in 1970 and 44,000 in 1969. Table N-3. HOUSING UNITS COMMITTED UNDER FEDERAL PROGRAMS (in thousands of units) New or rehabilitated Type of assistance 1969 actual Guaranteed or insured financing: Guaranteed or insured mortgages: Low- and moderate-income families Others Insurance on deposits in thrift institutions Direct Federal financing without subsidy _ __ Subsidized housing for special groups: Subsidy combined with financing: Low- and moderate-income families Others Subsidy without Federal capital investment: Low- and moderate-income families Direct Federal construction or acquisition: Military family housing Other Less: Estimated duplication * Totals Existing 1970 estimate 1971 estimate 35 261 66 263 124 300 397 368 5 1969 actual 1970 estimate 1971 estimate 10 806 15 727 20 826 385 494 477 464 6 6 10 12 11 48 5 41 19 32 10 * * * 142 344 389 34 36 31 8 * -40 3 * -37 6 * -38 * * -49 * 2 -48 -46 861 1,074 1,214 1,304 1,220 1,309 *Less than 500 units. Represents estimate of insured or guaranteed mortgages purchased by thrift institutions. 1 DESCRIPTION OF FEDERAL HOUSING PROGRAMS The following material describes the various types of Federal programs to aid housing. It follows the organization of the tabular material on budget outlays (table N-2), units committed (table N-3) and units made available (table N-4). Guaranteed or insured financing,—In terms of total housing units affected, the predominant characteristic of Federal housing programs is an emphasis on facilitating the flow of private mortgage credit through the use of insurance and guarantee programs. Leading examples are the insured loan programs in the Federal Housing Administration of the Department of Housing and Urban Development (HUD) and the Farmers Home Administration of the Department of Agriculture (USDA), the home loan guarantees of the Veterans Administration (VA), and the insurance of deposits in thrift institu390-700 O—70 -14 210 THE BUDGET FOR FISCAL YEAR 1971 Table N-4. HOUSING UNITS MADE AVAILABLE UNDER FEDERAL PROGRAMS (in thousands of units) New or rehabilitated Type of assistance Guaranteed or insured financing: Guaranteed or insured mortgages: Low- and moderate-income families Others Insurance of deposits in thrift institutions Direct Federal financing without subsidy Subsidized housing for special groups: Subsidy combined with financing: Low- and moderate-income families _ Others._Subsidy without Federal capital investment: Low- and moderate-income families Direct Federal construction or acquisition: Military family housing Other . Less: Estimated duplication 1 Totals 1969 actual Existing 1970 estimate 1971 estimate 34 166 58 195 109 204 397 368 16 1969 actual 1970 estimate 1971 estimate 10 541 15 518 20 542 385 494 477 464 9 6 10 11 U 40 5 57 19 71 10 * * * 76 129 237 23 38 25 3 * -40 8 * -37 5 * -38 * * -49 -48 -46 698 806 989 1,030 1,013 1,018 2 *Less than 500 units. Represents estimate of insured or guaranteed mortgages purchased by thrift institutions. 1 tions by the Federal Savings and Loan Insurance Corporation (FSLIC). Budget outlays from insurance programs are a relatively small part of the total. In HUD mortgage insurance operations and in the FSLIC, fees, premiums, and other revenues generally exceed insurance claims, permitting reserves to be built up to cover possible losses in the future. VA's loan guarantee program generally operates at a loss, as the bulk of the loans now outstanding were guaranteed without the collection of fees. A one-time fee is now collected on most of the new loans guaranteed, in order to cover part of the costs of the program. The USD A in its housing programs serves as mortgage originator and servicer as well as insurer. In this capacity, it may actually supply a portion of the financing required for the loans it insures, generally on an interim basis pending sale of the loans to private investors. The inventory of loans held is expected to decline by $694 million in 1971 through the use of a new instrument in the sale of loans. The bulk of the Farmers Home Administration insured housing loan program (all of it in 1971) is addressed to meeting the needs of lowand moderate-income families. This includes some loans (about 25% of the 1971 program) containing an interest credit" feature, under which the borrower pays reduced interest rates, depending on in 211 SPECIAL ANALYSES come. The balance of the 1971 program consists of loans at a fixed interest rate, below the current market rate. In both cases the Government makes up the difference between the rates charged to borrowers and those necessary to place loans with private investors. Table N-5. FINANCIAL IMPACT OF GUARANTEE AND INSURANCE PROGRAMS (in millions of dollars) Estimated requirements for funds: Federally insured or guaranteed mortgages and public housing bonds originated in the private sector with private financing. Sale to private investors of insured or guaranteed mortgages originated or purchased by Federal agencies Mortgages purchased by Federal agencies Gross private funds required for federally guaranteed or insured housing financing l 1969 1970 1971 12,496 14,918 18,351 581 -712 936 -981 2,861 -823 12,366 14,873 20,389 1 Includes funds provided by repayments on outstanding mortgages and by payment of claims Ion defaulted mortgages. In each case, some portion is reinvested in mortgages, reducing the net requirement for funds. Direct Federal financing without subsidy.—This category includes programs which provide direct loans, or their equivalent in the form of Government purchase of mortgages, but without attaching an explicit subsidy to the loan. These programs are generally designed to serve areas where private mortgage credit is not readily available (e.g., rural areas and small towns) or to finance mortgages which the private market is not prepared to accept (such as mortgages on housing of new and experimental character, or housing in urban renewal areas). While the number of units affected by these programs is small compared to that of the insurance and guarantee programs, the budget impact is larger. This reflects the fact that each unit results in outlays at the time the unit is produced equal to almost the full cost of the unit. In some cases, this budget impact can be reduced through sale of the direct loan to a private investor. The primary unsubsidized direct loan programs are those in the Veterans Administration and portions of the activity of the Special Assistance Fund in HUD's Government National Mortgage Association. Subsidized housing for special groups: Financing combined with subsidy.—This category covers Federal programs which provide a subsidy while simultaneously providing part or all of the capital financing required for the production of the housing unit. The most common method is the low interest rate direct loan, which is used in several programs in HUD and in the Small Business Administration's Disaster Loan program. Assistance to low- and moderateincome families is the predominant objective in the case of HUD, including, in the case of the Rehabilitation Loan program, helping present owner-occupants restore their housing to standard condition. The SB A program is aimed at assisting the victims of natural disasters. Two other HUD programs (Direct Loans for Housing for the Elderly and GNMA Special Assistance for Low- and Moderate-Income Housing) are being phased out in favor of the much 212 THE BUDGET FOR FISCAL YEAR 1971 larger program of Rental Housing Assistance. This latter program (discussed below) relies on private, rather than Federal, financing of the mortgage. In addition to low-interest loans, there are several programs which provide a one-time capital grant to reduce the cost of housing to the occupant. These include rehabilitation grants provided under HUD's Urban Renewal program and grants for Farm Labor Housing available from the Farmers Home Administration. A total of 18,000 units are expected to be made available under grant programs in 1971, compared to 12,000 in 1970. Subsidized housing for special groups: Subsidy without Federal capital investment.—This category includes programs under which the Federal Government subsidizes a dwelling unit for which the basic capital financing is provided by private investors at market rates of interest. The programs in this category (Low-Rent Public Housing, Rent Supplements, Rental Housing Assistance and Homeownership Assistance) are expected to add 262,000 units available for occupancy in 1971, representing a large part of the housing for low- and moderateincome families produced in that year. Under these programs, the Federal Government agrees to provide an annual (or monthly) payment on behalf of a specified unit of housing, with the subsidy contract usually running for the life of the mortgage or bond issued to finance the unit. This may be for a period of up to 40 years. In the case of the Homeownership and Rental Housing assistance programs, the payment represents a part of the interest cost on the mortgage. In the case of Low-Rent Public Housing and Rent Supplements, the payment commonly covers both principal and interest on the bond or mortgage and may cover a part of the operating costs as well. In all four programs, the subsidy payment can be flexible, with rising income on the part of the occupant being reflected in a lower subsidy. Outlays for these programs will continue to rise steadily, reaching $789 million in 1971 as new subsidy contracts are added to the continuing costs of contracts approved in prior years. Subsidized housing for special groups: Assistance to sponsors of housing for low- and moderate-income families.—This category includes programs of grants and loans to groups developing and operating housing for low^- and moderate-income families. Outlays in 1971 are expected to total $35 million, of which OEO's assistance to housing development corporations represents $24 million. Also included are programs of assistance to nonprofit sponsors funded in HUD, Agriculture, and the Appalachian Regional Commission, and certain assistance to Indian tribes provided by Interior. Direct Federal construction or acquisition of family housing.—The predominant activity in this category is the construction of family housing for military personnel, totaling almost 6,500 units to be made available in 1971. This includes a small number of leased units which will be added to the inventory in that year. In addition, about 170 units will be completed for civilian employees of a number of other Federal agencies. This consists of housing for employees who must, of necessity, be stationed in areas where adequate private housing is not available. SPECIAL ANALYSES 213 Preventing deterioration of the housing stock.—Programs in this category are aimed at maintaining the quality of existing units, rather than producing additional units. These activities are included in the analysis because the quality and durability of the existing supply of homes is a key determinant of the volume of new housing required to meet the physical shelter needs of the Nation. Maintaining units in a structurally sound and livable condition reduces the requirement for replacement units and increases the proportion of new units which constitute a net addition to the housing supply. This category includes the costs of routine maintenance and repair of the inventory of federally owned housing. These costs are estimated to total about $124 million in 1971. This category also includes concentrated code enforcement programs and rehabilitation projects (funded in HUD's Urban Renewal program) which assist local efforts to maintain housing quality. Outlays for these programs ($16 million in 1971) represent only the Federal share of the costs of actually carrying out assisted code enforcement and administering rehabilitation activities. Rehabilitation grants and loans, usually made in conjunction with assisted code enforcement programs and rehabilitation projects, are included in the category of subsidized housing. The cost of certain improvements in physical facilities which may also be provided in a rehabilitation or code enforcement program are not included in the analysis. Research and development.—Operation Breakthrough, under HUD's authority for Urban Research and Technology is the primary focus for Federal research and development in housing. The objective of this program is to achieve broad advances in market aggregation site acquisition and development, and planning, design and construction of housing. Outlays for Operation Breakthrough are expected to total $12 million in 1971, while other outlays for research and development in housing will total $8 million. This latter amount includes programs in HUD (other than Breakthrough), the Department of Agriculture, and the Department of Health, Education, and Welfare. Statistical and market analysis.—In order to provide policymakers at all levels of Government and the private sector with information on housing needs and production and the condition of financial markets related to housing, the Federal Government.maintains an ongoing program of statistical and market analysis. These activities range from short-range analyses of individual housing markets to broad gauge statistics on housing production and mortgage flows and the housing component of the decennial census. Outlays for this category are estimated to total $16 million in 1971. 214 THE BUDGET FOR FISCAL YEAR 1971 Undistributed administrative expenses.—These outlays, totaling $162 million in 1971, represent the costs of operating programs covering more than one program category, which it is not feasible to divide among categories. The largest item ($130 million) consists of the routine operating costs, excluding maintenance and repair, of the Defense family housing program. HOUSING ACTIVITIES OF GOVERNMENT-SPONSORED ENTERPRISES Two types of Government-sponsored enterprises, outside the budget, are of major importance in housing production. These are the 12 Federal Home Loan banks and the Federal National Mortgage Association (FNMA). Both operate to channel funds into mortgages by borrowing in the capital markets and directing these funds into mortgages. In the case of the Federal Home Loan banks, the investment takes the form of advances to thrift institutions which, in turn, invest the bulk of their assets in home mortgages. FNMA, on the other hand, purchases FHA-insured and VA-guaranteed mortgages directly. Both have the result of increasing the total supply of mortgage financing. The net increase in Home Loan Bank advances in 1971 is expected to total $2.4 billion, while the net increase in FNMA mortgage holdings is estimated at $4.6 billion. Both amounts are below the levels estimated for 1970, in anticipation of somewhat easier credit conditions which will require less support for the mortgage market from these institutions. FEDERALLY ASSISTED PRIVATE INVESTMENT IN HOUSING The vast bulk of housing in the United States is financed privately, including most of that portion which is federally assisted. Directly or indirectly, Federal housing programs are expected to affect decisions by private investors involving some $22 billion in 1971. This includes an $8.4 billion increase in savings at thrift institutions regulated by the Federal Home Loan Bank System which, together with $2.4 billion in advances from the Home Loan banks, will permit these institutions to increase their housing investments by $10.8 billion. Of this total, about $1.2 billion will be in mortgages insured or guaranteed by the Federal Government. Of the remaining $10.5 billion increase in outstanding guaranteed mortgages, $4.6 will be held by FNMA and $0.4 by GNMA, leaving $5.5 billion for purchase by other private investors, together with $1.4 billion of tax-exempt notes and bonds financing the construction of low-rent public housing and $6.7 billion of borrowings by FNMA and the Federal Home Loan banks. In order to facilitate investment in Government insured or guaranteed mortgages, the Government National Mortgage Association is authorized to guarantee mortgage-backed securities. Under this program, private financial institutions accumulate a supply of mortgages 215 SPECIAL ANALYSES and sell securities based on these mortgages to other investors, promising to pass on the principal and interest collections. GNMA is expected to guarantee performance by the issuers of $1 billion of these securities in 1971. This amount will constitute part of the net increase in outstanding guaranteed or insured mortgages shown in table N-6. Table N-6. NET FEDERALLY ASSISTED PRIVATE INVESTMENT IN H O U S I N G (in millions of dollars) 1969 Increase in outstanding guaranteed or insured mortgages: Federal Housing Administration L . _ __ Veterans Administration Farmers Home Administration Subtotal Less net increase in holdings by: Thrift institutions regulated or insured by the Federal Home Loan Bank System (estimated) Federal National Mortgage Association Government National Mortgage Association Net from other private investors Increase in assets of thrift institutions regulated or insured by the Federal Home Loan Bank System Less net increase in advances from Federal Home Loan b a n k s . . . Net from other private investors Increase in outstanding guaranteed public housing bonds and notes Increase in outstanding borrowings from the Government-sponsored enterprises: Federal National Mortgage Association.__ ___ Federal Home Loan banks Subtotal Total 1 2 public _ 1970 1971 4,368 1,558 244 5,201 130 354 7,877 1.888 1.904 6,170 5,685 11,669 -650 -1,665 -556 -950 -5.648 -405 -1,180 -4,600 -354 3,299 -1,318 5,535 5.794 -1,524 8.097 -4,487 10,800 -2,400 4,270 3.610 8,400 878 1.043 1,426 2 2,291 1,538 5,502 4,780 4,441 2.300 3,829 10,282 6,741 12,276 13,617 22,102 by Includes property improvement loans and some nonhousing mortgages. Includes $195 million of net borrowing from the public which occurred prior to the conversion of FNMA to private status. PART 3 SPECIAL ASPECTS OF FEDERAL PROGRAMS 217 INTRODUCTION Part 3 discusses trends and developments in selected areas of Government activity—aid to State and local governments, public works, and research and development. It groups these three special analyses, those designated O through Q. Special Analysis 0 summarizes Federal grants to State and local governments as well as loans and indirect assistance. It traces the development of Federal aids over time and relates them to the finances of both the Federal Government and State and local governments. This analysis also provides a profile of Federal grants by region, and that portion benefiting metropolitan areas. Special Analysis P brings together information on Federal construction and federally aided State and local public works. It also includes information on major Federal programs affecting construction by private cooperatives and nonprofit groups. Special Analysis Q identifies Federal programs for the conduct of research and development, and for facilities related to such activities. In addition, it provides information on Government-wide activities in the marine and space sciences. 218 SPECIAL ANALYSIS O FEDERAL AID TO STATE AND LOCAL GOVERNMENTS Federal Aid to State and Local Governments I960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 Fiscal iscal Yi Years 1971 Estimate HIGHLIGHTS OF THE 1971 AID PROGRAM In 1971, total Federal aid to State and local governments of $27.6 billion will be $3.5 billion more than in 1970, and nearly four times the amount in 1961. Major steps have been taken in 1969 and 1970 to revise the structure of Federal aid programs as a means of reducing rigidity and overlap, and increasing program effectiveness. Federal aid programs in several major areas have been reformed. Federal aid initiatives in the 1971 budget include: • The first quarterly installment on revenue sharing of $275 million; • The Family Assistance Program, with initial outlays of $500 million; • A revamped Food Stamp program of $1,250 million, reaching an estimated 7.5 million Americans; • A new environmental financing authority to ease the pressures in State and local bond markets; • A new 12-year program to assist urban transportation, through $10 billion of grants to communities to modernize and expand mass transit facilities and services; and • A $190 million increase for the Law Enforcement Assistance Administration for broad-purpose block grants to States. 219 220 THE BUDGET FOR FISCAL YEAR 1 9 7 1 The fastest growing grant programs in 1971 are those to provide medical care for the needy, income support for the poor, and improved public facilities and services in urban centers. Total aids for metropolitan or urban areas will be an estimated $19 billion in 1971. (Included in these amounts are grants to States that are channeled to urban areas.) HISTORICAL PERSPECTIVE Federal aid to State and local governments predates the Constitution. Under the Articles of Confederation, the Congress provided grants of Federal land in 1785 to support education in the Northwest Territory. This policy was reaffirmed in 1787, the year of the adoption of the Constitution. Grants and other forms of Federal aid have grown rapidly over the past two decades. At the same time, State and local governments raised from their own resources four times the amount of Federal aid. Table 0-1. STATE AND LOCAL GOVERNMENT FINANCES, 1948 AND 1968 In billions of dollars Source 1968 1948 Revenue: Own revenue Federal aid Total Expenditures. Average annual percentage increase 15.6 2.0 87.8 18.3 9.0 11.7 17.6 106.2 9.4 17.4 107.6 9.5 Source: Department of Commerce; National Income Accounts—Calendar Year. The Federal-Aid Highway Act of 1956 significantly modified the pattern of aid to State and local governments. It moved commerce and transportation programs to a dominant position in Federal assistance (43% of the total) by 1960. The increase in human resource programs during the 1961—71 period caused these programs to rise to 46% of Federal aid in 1965 and 59% in 1971. Commerce and transportation declined to 40% in 1965 and 19% in 1971. Table 0-2. PERCENTAGE DISTRIBUTION OF FEDERAL AIDS TO STATE AND LOCAL GOVERNMENTS BY FUNCTION Function Agriculture and rural development Natural resources > Commerce and transportation Community development and housing... Education and manpower _> Health... Income security _ Other.... Total 1 Less than 0.5%. 1950 actual I960 actual 1965 actual 1971 estimate 11 5 55 1 8 3 19 3 14 4 47 2 4 2 43 3 10 4 33 1 5 2 40 5 10 7 29 2 4 3 19 11 17 14 28 4 100 100 100 100 100 5 2 21 0) 1955 actual SPECIAL ANALYSES 221 State-local fiscal problems.—An imbalance exists between public services demands on State and local governments and the revenues produced by their tax systems, which tend to be relatively unresponsive to economic growth. State and local expenditures, as measured in the national income accounts, rose by $90 billion from 1948 to 1968, whereas revenue from their own sources increased $72 billion. Over the same period, State and local debt rose by more than $110 billion. State and local governments rely principally on consumer and property taxes, which grow at a rate barely sufficient to keep up with the growth in the economy. In an attempt to meet growing service demands, States made more than 300 rate increases in major taxes over the last decade (1960-69). In calendar year 1969, 36 State legislatures approved new taxes or increased existing ones that will augment tax receipts by a record $4 billion. This is significantly larger than the $2.5 billion and $1.3 billion added to State tax receipts in 1967 and 1965, respectively. Local property taxes were also raised frequently during this period. Personal income tax receipts, which accounted for 45% of total Federal revenues but only about 8% of total State and local government revenues, are estimated to increase by roughly 15% for every 10% rise in GNP. The response of the Federal Government to the fiscal plight of State and local governments over the past two decades has been to increase Federal grants from less than $2 billion in 1948 to over $18 billion in 1968. While effective in many instances, this rapid growth in Federal grants has been accompanied by: • Overlapping programs at the State and local level; • Increased administrative costs; • Program delays and uncertainty; • A decline in the authority and responsibility of chief executives, as grants have become tied to functional bureaucracies; and • Creation of new and frequently competitive State and local governmental institutions. In recognition of these problems, the administration has proposed basic reforms in the structure of many Federal aid programs. This involves increased emphasis on broader and less conditional forms of aid through revenue sharing and the streamlining of conditional aid through administrative reform and grant consolidation. SIGNIFICANT FEATURES Federal aid expenditures will grow $3.5 billion over 1970, reaching a record level of $27.6 billion in 1971. Direct assistance.—The principal forms of existing direct financial assistance to States and localities are grants, shared revenues from natural resource activities, and loans. In 1971, Federal grants are estimated to reach $27.2 billion, accounting for 98% of total Federal aid. Shared revenues will account for an additional $436 million. Loans will provide some $429 million in net assistance in 1971, not including the lending activity that is being encouraged in the private sector with Federal interest subsidies. 222 THE BUDGET FOR FISCAL YEAR 1971 In total, Federal aid now provides 18% of State and local revenues. In terms of direct cash flow, about seven-eights of the total goes to the States, with the balance going to local jurisdictions. However, the State channels part of this Federal grant money into metropolitan areas. As shown in table 0-3, the Department of Health, Education, and Welfare administers the largest total of Federal aid programs. Table 0-3. FEDERAL-AID OUTLAYS BY AGENCY (in millions of dollars) Agency Executive Office of the President Funds appropriated to the President: Economic opportunity programs Other (primarily Appalachia) Department of Agriculture Department of Commerce _ Department of Defense: Military _ _ Civil Department of Health, Education, and Welfare. __ Department of Housing and Urban Development. Department of the Interior Department of Justice _. Department of Labor _._ Department of State _ _ Department of Transportation __ Treasury Department.. _ Veterans Administration National Capital region * Other. Allowance for revenue sharing. Total outlays for Federal aid. 1969 actual 1970 estimate 1971 estimate 1,406.5 162.2 1,534.0 150.4 1,371.2 332.6 1,943.2 161.6 895.5 316.8 2,756.3 178.8 34.4 17.7 10,123.8 1,109.3 401.7 28.4 629.3 6.3 4,401.6 115.3 14.5 92.0 27.5 32.4 23.0 11,747.8 2,107.3 494.4 156.9 703.9 5.5 4,698.5 130.0 20.2 147.4 43.3 34.2 10.7 12,762.1 2,560.3 753.7 338.0 1,471.0 5.9 4,791.3 136.0 22.8 262.4 53.1 275.0 20,254.9 24,119.2 27,623.9 1 Includes Federal Payments to the District of Columbia in the following amounts: 1969, $85.9 million; 1970, $127.5 million; 1971. $140.3 million. Indirect assistance.—Apart from direct Federal aid, many other Federal activities that are not included in this analysis affect the finances of State and local governments. Examples are State and local participation in Federal employee training programs and technical assistance provided by Federal agencies. States and localities also have first call on obtaining (at relatively nominal costs) surplus land and equipment of the Federal Government. State and local governments also receive special benefits through the tax system. Interest cost savings that result from the exemption of interest on State and local bonds from Federal income taxes are estimated at $2.05 billion in 1969. The Federal credit for payment of State inheritance and estate taxes has encouraged States to make more effective use of this resource at a Federal revenue cost of $350 million. Similarly, since taxpayers may deduct local property taxes from Federal taxable income, a portion of State and local taxes is offset by a reduction in the taxpayers' Federal liability. In 1969, the value of this deduction in terms of tax savings to individuals was approximately $2.25 billion. Other State and local taxes deducted from Federal tax liability amounted to an additional $4.25 billion with approximately half accounted for by personal income taxes in 1969. SPECIAL ANALYSES 223 NEW DIRECTIONS FOR THE SEVENTIES The Federal aid policies of the administration have been summarized under the heading the New Federalism, which encompasses: • Responsible decentralization.—Efforts are being made to support and strengthen leadership at the State and community levels through measures such as revenue sharing, the proposed Manpower Training Act of 1969, and the revision of grant program procedures. • Basic systems' reform.—Basic reform is being undertaken in major functional areas as in the case of welfare, unemployment insurance, and mass transit. • Effective implementation of Government policies.—Management processes for Federal aid programs are being overhauled. Revenue sharing.—Major characteristics of the administration's revenue sharing proposal are: • Predictability.—The amounts to be shared will be based on a specified percentage of the personal income tax base. • Expanding scale.—Along with the natural growth in the base, the percentage applied to the base will grow in amount from one-sixth of 1% for the last half of 1971, to 1% by 1976. The absolute amounts will rise from $275 million in 1971 to an estimated $4 billion for 1975. The first quarterly payment of $275 million will be made in the final quarter of 1971, with the second payment under the 1971 appropriation to be made early in 1972. • Unconditional.—Revenue sharing funds will not be tied to specific programs, processes, or requirements. The allocation of funds will be based on formulas prescribed by law and linked to data prepared on a regular basis by the Department of Commerce. • Distribution by need and effort.—The amount to be shared with any given State will be based on State population, adjusted for combined State and local tax effort. States with greater relative revenue effort will get more than they would otherwise. (Table 0-4 shows the State distribution of revenue sharing based on a $1 billion fund to facilitate percentage comparisons.) • Guarantees funds for cities and counties.—To place a minimum guarantee on the share of funds that cities, counties, and townships would receive, the administration's bill stipulates that States must "pass-through" to each such local jurisdiction the same relative share of the total State allocation that the local jurisdictions' revenue total bears to total State-local revenue. 224 THE BUDGET FOR FISCAL YEAR 1971 Table CM. STATE AND LOCAL SHARES UNDER ADMINISTRATION REVENUE SHARING PROPOSAL I Illustrative outlays of $1 billion) In millions of dollars State State total Alabama . . . Alaska Arizona Arkansas. _ California . _ Colorado Connecticut Delaware.. District of Columbia Florida Georgia . _ _ _. ... . . . Hawaii . Idaho Illinois . Indiana _ . Iowa .. Kansas Kentucky . Louisiana. Maine Maryland. . . _ _ . Massachusetts. Michigan .. Minnesota Mississippi _. . _ Missouri _ _. Montana ._ _ Nebraska Nevada New Hampshire. . . . . _ New Jersey New Mexico New York North Carolina North Dakota. . _ . . . . Ohio Oklahoma Oregon . PennsylvaniaRhode Island South Carolina - _ _ _ South Dakota Tennessee Texas . Utah . . Vermont . Virginia . Washington West Virginia _ Wisconsin > .. _ Wyoming _ _ United States total1 . i Detail may not add due to rounding. Local share State share 18.0 1.6 10.3 10.0 107.3 11.9 12.1 2.8 4.5 31.7 22.3 4.8 4.3 42.8 24.3 15.2 12.3 15.4 22.2 4.7 17.4 26.9 42.8 21.5 13.4 20.5 4.0 6.9 2.6 2.9 30.2 6.6 108.5 24.3 4.6 43.5 13.5 11.3 50.3 3.9 12.6 4.2 18.5 49.6 6.1 2.3 19.8 17.9 8.9 24.0 2.2 4.5 .5 2.2 1.6 33.2 2.9 6.0 .4 4.5 9.2 4.9 1.4 .9 10.7 5.3 3.8 3.8 3.2 3.9 2.0 7.9 13.9 10.5 6.0 3.2 5.0 1.5 2.1 .9 1.0 11.9 1.1 45.6 7.6 1.2 12.0 2.8 2.2 12.2 1.7 1.9 1.2 8.0 12.5 1.1 .4 8.0 3.1 1.4 6.8 .5 22.4 17.3 3.5 3.4 32.1 19.1 11.4 8.6 12.1 18.3 2.7 9.5 13.0 32.2 15.6 10.2 15.5 2.5 4.8 1.7 2.0 18.2 5.5 62.9 16.7 3.4 31.5 10.7 9.1 38.1 2.2 10.7 2.9 10.4 37.1 4.9 1.9 11.8 14.8 7.5 17.1 1.6 1,000.0 300.1 699.9 13.5 1.1 8.1 8.4 74.0 8.9 6.1 2.4 SPECIAL ANALYSES 225 Improving the delivery system.—Major efforts are also under- way to improve the delivery system for Federal assistance programs. They include reorganization within the executive branch, proposals for consolidation of related assistance programs, joint funding, and the restructuring of existing programs. A concerted effort is being made to decentralize decisionmaking for Federal assistance programs and to simplify administrative requirements and make them more consistent. Executive reorganization.—Policy implementation must be effective if the services are to reach and benefit the intended recipient. A beginning has been made in the area of organization through steps taken to: • Modify the regional boundaries of the major domestic agencies in the field so that their headquarter cities are the same and the regions which they cover conform; • Restructure the Manpower Administration of the Labor Department and the Office of Economic Opportunity; • Create the Office of Intergovernmental Relations in the Office of the Vice President; and • Strengthen the Office of Executive Management in the Bureau of the Budget. Administrative improvements.—The proliferation of grant programs has impaired our ability to achieve program goals efficiently. As a major step toward improving administration, proposals have been advanced which would: • Authorize the President to consolidate closely related programs if Congress, within 60 days, does not disapprove his proposal; • Provide for joint funding of closely related grant programs in a single package to achieve a particular objective within a given agency; and • Authorize joint funding of projects across agency lines. Within the executive branch, the Bureau of the Budget and the 10 Federal agencies on the Urban Affairs Council initiated the "Federal Assistance Review" to decentralize and simplify the administration of Federal aid programs. Under this review, technical assistance teams, consisting of representatives from the Bureau of the Budget and other Federal agencies, are also providing recommendations to State and local governments for improving their capacity for the coordination, planning, and evaluation of Federal aid programs. IMPACT OF FEDERAL AID Federal aid in relation to Federal out*ays and State-local revenues.—The rapid increase in Federal aid to State and local governments has become an increasingly important factor in the finances of all levels of government. Federal aid has risen sharply as a proportion of Federal outlays in the past decade—going from 7% of the total in 1961 to an estimated 14% in 1971. In terms of civilian domestic programs, 23% of Federal outlays will take the form of aids to State and local governments in 1971. Because of successful efforts by State and local governments to increase revenues from 226 THE BUDGET FOR FISCAL YEAR 1971 their own sources, the relative increase in the impact of Federal aid has not been quite as marked for the recipient State and local governments as it has been for the Federal Government. Nevertheless, Federal aid has risen as a proportion of State and local revenues moving from 13% in 1960 to an estimated 18% in 1970. Table 0-5. FEDERAL-AID OUTLAYS IN RELATION TO TOTAL FEDERAL OUTLAYS AND TO STATE-LOCAL REVENUE Federal aid As a percent of— Fiscal year 1959. I960. . 1961. 1962. 1963. _ 1964 1965 1966 1967 1968 1969. 1970 estimate 1971 estimate Amount (millions) _. 6,669 7,040 7,112 7,893 8.634 10,141 10,904 12.960 15.240 18,599 20,255 24,119 27,624 Total Federal outlays 7.2 7.6 7.3 7.4 7.8 8.6 9.2 9.7 9.6 10.4 11.0 12.2 13.8 Domestic Federal outlays 1 15.9 16.4 15.4 15.8 16.5 17.9 18.4 19.2 19.5 20.9 21.3 21.8 23.0 State-local revenue 2 (3) 13.5 12.7 12.0 ii.3 12.5 13.4 13.4 14.2 15.3 16.9 17.4 18.2 1 3 Excluding outlays for defense, space, and international programs. Excludes State-local revenue from publicly-operated utilities, and liquor stores. > Not available. Matching requirements.—The pattern of State and local spending is influenced to some extent by Federal grants requiring the recipient government to match Federal-aid funds with its own resources. The matching, or cost-sharing requirements are of two kinds: variable matching (which takes account of the differing abilities of recipient governments to support aided functions), and fixed ratio matching (under which each grantee is required to share in the same proportion of program cost). In 1966, State and local governments provided an estimated $5.5 billion of their own funds to receive the $13 billion of Federal grants spent in that year. This means that, on the average, recipients raise $1 for every $2 forthcoming from the Federal Government. However, State and local government matching funds account for only about 10% to 14% of general expenditure out of their own revenue sources. Public assistance and highways account for the largest share of total required matching funds. In 1971, required matching funds will rise to an estimated range of $14 billion to $16 billion. 227 SPECIAL ANALYSES Regional distribution of Federal aids.—In 1968, the distri- bution of Federal aids on a regional basis ranged from a high of more than $4 billion in the Southeast to a low of $621 million in the Rocky Mountain area. When account is taken of population differences, the Rocky Mountain area ranked highest with grant payments reaching nearly $130 per capita, while the Great Lakes and Mideast regions were lowest with $67 and $87 per capita, respectively. Population density and per capita income are the two major factors that accounted for this wide variation. Generally, the level of per capita aid is inversely related to population density. The population density of the Rocky Mountain area is the lowest of the regions, per capita aid is highest. At the other end of the scale, per capita aid is lowest in the Great Lakes area and the Mideast where population density is greatest. This inverse relationship stems primarily from aid for highway construction and other grants where program needs are not a direct function of population density. Table Q-6. REGIONAL DISTRIBUTION OF FEDERAL AID, FISCAL 1968 Total (in millions of dollars) Region New England Mideast. _ Great Lakes Plains Southeast Southwest Rocky Mountain Far West United States _ _- _ Per capita Percent of State and local government general revenue 1,072 3,729 2,646 1,455 4,110 1,621 621 2,853 93.63 87.48 66.82 90.59 94.03 100.27 129.69 109.36 18.2 15.5 14.2 17.8 22.8 22.4 22.9 16.3 118,601 93.07 18.0 1 Includes $497 million for Puerto Rico, Virgin Islands, and other adjustments. Sources: "Annual Report of the Secretary of the Treasury," and "Governmental Finances in 1967—68," Bureau of the Census. These reports provide additional information concerning State distribution of Federal grants. Equalization.—Per capita aid is also inversely related to per capita income. There are two reasons for this relationship. Some grant programs, such as grants for hospital construction, require lower matching by the relatively poorer States. Other programs, such as those for public assistance and elementary and secondary education, are designed as aids to the disadvantaged and tend to flow to States having proportionately more individuals with lower incomes. The latter tendency reflects the growing impact of fiscal equalization provisions common to a number of the more recent grants programs. These provisions are designed to help States and localities with limited resources participate more effectively in many jointly financed programs. Federal aids on the whole are mildly equalizing, being inversely related to per capita income. This equalizing tend- 228 THE BUDGET FOR FISCAL YEAR 1971 ency decreased from 1967 to 1968—the latest year for which data are available for State and local governments.1 Aid in urban areas.—Between 1960 and 1968, more than 75% of the population growth occurred in the metropolitan complexes. Today, about two-thirds of the population lives in 233 metropolitan areas. In 1971, approximately $19 billion of the $28 billion of total Federal aids will be spent in standard metropolitan statistical areas (SMSA's). This is an increase of about $15 billion or nearly 300% over the amount of aid provided to these urban areas in 1961, and almost $5 billion in the short span of only 3 years. The major increases in Federal Grants for urban areas occur in law enforcement, Model Cities, and public assistance. This analysis includes programs that provide financial assistance to urban communities to help them meet their public service needs. It also includes grants made to States that subsequently benefit metropolitan areas. Standard metropolitan statistical areas (SMSA's) were chosen as the definition of "urban" because they are the urban unit for which information on Federal aids is most generally available. These areas cover the bulk of the urban population and place heavy pressure on public service requirements: high population density and rapid population growth. The amounts shown in table 0-7 are approximations based on the best information readily available. There are a number of other Federal programs that have an important bearing on urban development including direct Federal construction and various loan and loan insurance activities. No attempt has been made to add up all the various forms of funds. However, the Department of Housing and Urban Development estimates that the total Federal financial commitment for urban social and community development aids is about $44 billion in 1971—compared to $21 billion in 1964. The Department's figures indicate the magnitude of Federal financial involvement in communities of 2,500 population or over, as measured by obligations or commitments—including loans insured or guaranteed. While the tabulations are not fully comparable, the estimates of the Department of Housing and Urban Development do serve to put in perspective the dimensions of urban-area expenditures not covered by this analysis. Because of limitations of the data, it is not possible to trace funds directly from the Federal Government to most metropolitan areas. However, a pilot study conducted in San Francisco traced $23 million that went directly to the city in 1968 and an additional $41 million that went through the State or other related intervening jurisdictions, subsequently benefiting the city. The total of $64 million accounted for 10% of San Francisco's total revenues in that year. In recent years, the States have become increasingly responsive to the needs of the urban areas. There are now 27 State Offices or Councils of Community Affairs. Many other States have special advisors to coordinate State aid to urban areas. 1 Excluding Alaska, Hawaii, and the District of Columbia, the correlation between per capita grants and per capita income in 1967 was —0.338. This equalizing effect decreased in 1968 with the correlation coefficient still negative at —0.182. One of the most effective grants in terms of allocating funds inversely to income is title I of the Elementary and Secondary Education Act, with more than half of the variation in these grants among the States explained by variations in per capital income. (The simple correlation coefficients were -0.747 in 1967 and -0.714 in 1968.) 229 SPECIAL ANALYSES Table 0-7. FEDERAL-AID OUTLAYS IN URBAN AREAS (in millions of dollars) Function and program 1961 actual National defense Agriculture and rural development: Donation of surplus commodities. Other Natural resources: Water pollution control _ Other 1964 actual 1969 actual 1971 10 28 30 31 128 27 231 40 313 104 431 155 24 30 8 10 79 101 161 205 158 104 1,398 36 1,948 36 2,225 83 139 2,349 Commerce and transportation: Economic development __ Highways Airports _ Urban mass transportation __ Other Community development and housing: Community action program Urban renewal Public housing Water and sewer facilities Model Cities Other _ Education and manpower: Head Start and Follow Through Elementary and secondary ___ Higher education ___ Vocational education _ _ Employment security administration Manpower activities Other _ Health: Hospital construction __ Regional medical program. Mental health Maternal and child health . Comprehensive health planning and services. ._ Health educational facilities Medical assistance Health manpower Other Income security: Vocational rehabilitation Public assistance --Child nutrition, special milk and food stamps Other - 106 105 159 136 36 17 Total, aids to urban areas. 449 776 478 95 450 102 256 265 1,258 184 217 593 712 162 274 14 29 344 1,262 210 48 66 4 18 29 34 48 89 19 50 139 80 64 7 140 179 449 530 77 106 1,713 28 54 37 1,170 131 3 25 - 432 786 257 52 8 75 222 5 28 303 61 ,450 168 16 General government: Law enforcement National Capital region Other.... Other functions Revenue sharing. _ 5 71 231 3 122 --- 38 9 2 87 18 65 170 120 156 2,141 68 68 247 3,022 482 148 408 4,094 969 17 85 27 237 140 146 160 184 3,893 5,588 , 14,045 . 18,748 230 THE BUDGET FOR FISCAL YEAR 1971 Table 0-8. FEDERAL AID TO STATE AND LOCAL GOVERNMENTS i (expenditures in millions of dollars) Agency and program Funcional code National defense: Executive Office of the President: Office of Elmergency Preparedness—Federal contributions to State and local planning 059 Department of Defense—Military: Civil defense shelters and financial assistance 051 Construction of Army National Guard centers _- 051 Atomic Energy Commission 058 Total, national defense. _ International affairs and finance: Department of State: East-West Cultural and Technical Interchange Center. International Center, Washington, D.C _ 153 151 Total, international affairs and finance Agriculture and rural development: Department of AgricultureCommodity Credit Corporation and Consumer and Marketing Service: Removal of surplus agricultural commodities and value of commodities donated 351 Rural water and waste disposal facilities 352 Mutual and self-help housing 35? Rural housing for domestic farm labor _ 352 Resource conservation and development 354 Consumer protective programs 355 Agricultural Research Service: Grants for basic scientific research ___ 355 Agricultural experiment stations __ 355 Cooperative agricultural extension service 355 Payments to States, territories, and possessions, Consumer and Marketing Service _. 355 See footnotes at end of table. 1970 estimate * * 1971 estimate 23.2 11.0 26.1 24.7 8.4 5.7 7.7 9.6 40.1 42.0 41.8 6.1 5.2 .3 5.6 .3 6.1 5.5 5.9 609.7 27.9 549.4 34.0 692.2 30.8 2.8 7.2 1.3 5.7 8.4 2.1 10.2 7.6 6.0 9.9 23.3 25.1 8.9 8.7 58 0 80.9 60 2 111.2 78.5 0 7 148.4 1.6 1.6 1.6 807.2 803.8 995.3 401 81.5 97.7 103.1 40? 20.8 24 6 24.3 402 402 52.9 79.1 86.6 .9 1.0 1.0 401 15.1 20.4 7.9 401 2 7 2 6 2 8 401 161.1 192.3 393.5 40? 13 1 6 18 Total, agriculture and rural development Natural resources: Department of Agriculture: Watershed protection and flood prevention Grants for forest protection, utilization, and basic scientific research National forest and grassland funds; payments to States and counties (shared revenue) Assistance to States for tree planting Department of Defense—Civil: Corps of Engineers: Payment to California, flood control _ Payments to States, Flood Control Act of 1954 (shared revenue) ___ Department of the Interior: Water pollution control _ Payments to States and counties from grazing receipts, grasslands, and sales of public lands (shared revenue) _ Bureau of Reclamation: Grants Payments to Arizona. Nevada, and Klamath reclamation area (shared revenue) __ 1969 actual 401 401 4 .7 .8 .8 231 SPECIAL ANALYSES Table 0-8. FEDERAL AID TO STATE AND LOCAL GOVERNMENTS—Con. (expenditures in millions of dollars) Agency and program unc. onal cod 1969 actual 1971 1970 Natural resources—Continued Department of the Interior—Continued Office of Saline Water Payments from grant lands: Oregon, California, and Coos and Douglas Counties (shared revenue) Mineral Leasing Act payments (shared revenue) Mine drainage and solid waste disposal Aid for commercial fisheries Payment to Alaska from Pribilof Island fund (shared revenue) Fish and wildlife restoration and management _ Wildlife refuge fund and grasslands payments (shared revenue) _ Outdoor recreational areas (Land and Water Conservation Fund) __ Preservation of historic properties_ ___ Department of State: Pacific Halibut Commission Federal Power Commission: Payments to States (shared revenue) Tennessee Valley Authority: Payments in lieu of taxes (shared revenue)__ __ _. Water Resources Council 401 .3 .5 402 403 403 409 25.6 51.4 32.1 "To" 53.9 .1 7.6 32.0 58.0 .1 6.2 409 405 .3 6.2 .3 7.9 .1 8.6 405 30.8 33.0 47.0 405 405 409 44.4 * .3 72.8 88.6 5.0 14.5 2.4- 16.1 2.4 20.0 3.0 517.9 647.0 889.4 507 507 2.0 154.9 4.2 243.4 271.8 502 506 506 .4 4.4 .4 4.0 .4 3.0 .5 506 506 507 507 .2 .4 145.3 1.3 156.8 1.7 .4 1.0 174.5 401 401 401 Total, natural resources. Commerce and transportation committee: Funds appropriated to the President: Public works acceleration Appalachian development Department of Commerce: State marine schools _ Office of State Technical Services Promotion of tourism National Bureau of Standards: Research on fire prevention through improvement of housing construction _ Natural gas pipeline safety Economic development assistance — Department of the Interior: Resources management Department of Transportation: Chamizal Memorial Highway Forest and public lands highways._ Highway beautification Highway safety Federal-aid highways (trust fund) Urban mass transportation facilities _. Federal-aid airport program Airports planning and development-_ _ Other 503 503 503 503 503 503 501 501 503 Total, commerce and transportation.. 38.0 20.3 18.4 4,085.1 6.2 1.0 4.0 31.7 21.9 32.6 24.2 64.0 63.1 4.270.4 4,353.9 129.8 .2 90.0 2.3 .9 256.5 89.0 50.0 3.5 4,710.1 5,109.4 5,248.0 615.0 541.3 561.1 135.9 103.7 Community development and housing: Funds appropriated to the President: Office of Economic Opportunity: Community Action programs See footnotes at end of table. 551 232 THE BUDGET FOR FISCAL YEAR 1971 Table 0-8. FEDERAL AID TO STATE AND LOCAL G O V E R N M E N T S - C o n . (expenditures in millions of dollars) Agency and program unc-] tional; code 1969 actual 1970 estimate 1971 estimate 285.3 1,049.0 55.0 .5 119.0 26.0 500.0 1,035.0 Community development and housing—Continued Department of Housing and Urban Development: Model city grants Urban renewal Open space land and urban beautification New community assistance Grants for basic water and sewer facilities Grants for neighborhood facilities Advance acquisition of land Urban planning grants Urban information and technical assistance Community development training programs Low-rent public housing program National Homeownership Foundation Alaska housing 551 552 552 552 553 553 553 554 554 554 555 555 555 Total, education and manpower. See footnotes at end of table. 80.2 10.6 .1 32.4 .8 .6 342.7 1.0 1,669.8 Total, community development and housing. Education and manpower: Funds appropriated to the President: Office of Economic Opportunity: Work and training programs.. Head Start and Follow Through Department of Housing and Urban Development: College housing— Department of Health, Education, and Welfare: Elementary and secondary education — _ (Portion for educationally deprived children) Assistance to schools in federally affected areas Education of the handicapped.__ Civil rights education Higher education activities....-(Portion to private institutions) .— Vocational education Libraries and community services Special institutions for the blind and deaf Corporation for Public Broadcasting. ._ _ Education professions development Work incentive activities Department of Labor: Manpower development and training activities Manpower Training Act Grants to States for administration of employment security programs (trust fund) Department of Interior: Bureau of Indian Affairs: Education and welfare services .National Foundation on the Arts and Humanities Other 9.3 533.8 43.3 1.0 44.0 1.4 3.4 460.7 71.0 2.0 146.0 38.0 2.0 45.0 4.4 637.7 .3 1.0 2,587.6 | 3,042.2 ( 604 601 471.7 319.8 514.5 315.4 331.4 602 53.1 61.0 79.0 1,359.0 ,676.3 601 601 601 601 601 602 602 603 608 608 608 601 604 1,404.3 (1,073.3) 5.0 26.5 30.6 1.3 15.0 84.0 132.8 604 604 41.2 38.1 44.3 696.0 609 588.1 665.8 730.7 601 609 600 13.5 20.0 .2 7.5 21.7 398.0 22.1 1.4 349.6 (68.6) 255.4 67.8 1.3 14.1 4,063.5 (1,140.0) (1,249.0) 122.0 397.0 26.5 11.1 352.6 (64.4) 257.4 84.3 24.9 20.5 306.5 (59.2) 309.6 52.2 1.4 22.5 93.4 193.0 4.9 4,342.5 I 4,730.4 233 SPECIAL ANALYSES Table 0-8. FEDERAL AID TO STATE AND LOCAL GOVERNMENTS—Con. (expenditures in millions of dollars) Agency and program Func-| tional code 1969 actual 1970 estimate 1971 estimate Health: Department of Health, Education, and Welfare: Hospital construction (Portion to private, nonprofit institutions) _ _ Health manpower __ Comprehensive health planning and services__. Regional medical programs Construction of health educational facilities Mental health Health services Environmental health Dental health care Indian health services and facilities Patient care and health services Family planning service Communicable and chronic diseases Maternal and child health Medical assistance._ Other 651 651 651 650 650 651 651 651 653 651 652 652 653 653 652 652 651 Total, health. 254.6 (127.3) 35.4 118.8 26.6 133.4 62.2 25.8 32.7 .3 .8 1.6 14.5 272.0 (140.1) 59.3 156.7 27.0 190.9 70.1 16.4 42,5 4.2 2.0 1.2 249.6 (123.2) 85.2 181.8 26.3 195.8 81.4 7.1 49.1 4.9 1.4 1.2 4.0 .5 207.9 2,855.5 199.2 2,284.7 2.2 3.6 189.5 2,612.4 1.7 3,192.7 3,649.6 3,951.6 Income security: Funds appropriated to the President: Disaster relief Public assistance: Income maintenance payments Social services for welfare recipients Juvenile delinquency Vocational rehabilitation Administration on Aging Food stamp ___ Child nutrition program and special milk 703 6.8 703 703 703 703 703 702 702 3,652.3 343.3 .8 352.8 Total, income security.. 11.3 234.3 336.0 85.0 50.0 4,368.4 4,889.5 531.1 497.5 9.5 6.3 561.6 499.0 15.2 558.5 378.6 13.5 1,218.8 327.1 4,937.7 I 6,408.5 I 7,601.0 Veterans benefits and services: Veterans Administration: Aid to State homes Grants for construction of State nursing homes.. Administrative expenses 12.5 1.8 .2 15.1 4.0 1.1 16.8 14.5 20.2 22.8 909 46.6 57.5 71.9 909 908 12.6 28.4 11.2 156.9 12.2 338.0 910 80.2 87.0 87.0 904 35.1 43.0 49.0 804 804 804 Total, veterans benefits and services- 5.0 .9 General government: Department of the Interior: Grants to territories Internal revenue collections, Virgin Islands (shared revenue) Department of Justice: Law enforcement assistance Treasury Department: Tax collections for Puerto Rico (shared revenue) Bureau of Customs: Refunds, transfers and expenses of operation, Puerto Rico and the Virgin Islands (trust fund share revenue) See footnotes at end of table. 234 T H E BUDGET FOR FISCAL YEAR 1971 Table O-«. FEDERAL AID TO STATE AND LOCAL GOVERNMENTS—Con. (expenditures in millions off dollars) Func- Agency and program 1969 1970 1971 code General government—Continued National Capital region: Federal payment to District of Columbia Washington metropolitan area transit program __ Dulles sewer project 85.0 6.1 .9 127.4 19.9 .1 140.3 122.1 295.0 503.1 820.5 909 909 909 Total, general government 275.0 Allowance for revenue sharing 20,254.9 Total, grants and shared revenues 24,119.2 27,623.9 "Less than $500 thousand. Grants-in-aid unless otherwise specified. Excludes loans which are shown separately in table O-9. Manpower programs transferred to Labor Department. 1 2 Table 0-9. FEDERAL LOANS TO STATE AND LOCAL GOVERNMENTS Net outlays Disbursements Agency and program 1969 1970 1971 1969 1970 1971 Agriculture and rural development: Department of Agriculture: Soil Conservation Service Farmers Home Administration Total, agriculture and rural development 0.8 64.6 0.5 71.5 53.5 0.8 62.7 0.5 65.6 25.1 65.4 72.0 53.5 63.5 66.1 25.1 1.3 1.9 .6 1.3 1.9 .6 5.7 5.1 5.3 4.4 3.7 3.9 7.0 7.0 5.9 5.7 5.6 4.5 18.6 37.6 23.2 18.1 36.6 22.0 5.0 40.0 -.2 35.0 4.8 40.0 -.3 35.0 82.6 58.2 17.9 81.4 56.7 Natural resources: Department of Agriculture: Soil conservation _ __ _ Department of the Interior: Reclamation loans Total, natural resources Commerce and transportation: Department of Commerce: Economic development assistance _ Department of Transportation: Mass transportation facilities _ Highway construction Total commerce and transportation. See footnotes at end of table. 18.6 235 SPECIAL ANALYSES Table 0-9. FEDERAL LOANS TO STATE AND LOCAL GOVERNMENTS—Con. Disbursements Agency and program 1969 actual Net outlays 1970 1971 estimate estimate 1969 actual 1970 1971 estimate estimate Community development and housing: Department of Housing and Urban Development: Renewal and housing assistance Metropolitan develoDment Total, community development and housing 992.5 49.4 884.5 43.6 50.0 42.5 6.8 38.3 58.3 32.4 566.2 1,041.9 928.1 92.5 45.1 90.7 513.2 53.0 Education and manpower: Department of Health, Education, and Welfare: Higher education activities _. Department of Housing and Urban Development: College housing. 41.2 35.9 41.0 39.7 33.7 38.5 105.0 90.0 72.0 81.7 65.6 46.9 Total, education and manpower 146.2 125.9 113.0 121.4 99.3 85.4 -.2 -.4 General government: Department of Defense—Civil: Ryukyu Islands __ Department of the Interior: Administration of Territories Department of Justice: Law enforcement facilities General Services Administration: General activities District cf Columbia: Capital outlays Other National Capital Planning Commission 7.4 4.8 5.3 7.1 4.4 4.9 2.4 13.7 18.0 2.4 13.7 18.0 -1.4 -1.4 -1.4 149.9 40.4 64.8 103.3 145.9 _* .1 67.4 40.4 109.0 40.4 .1 Total, general government. _ _ 117.6 213.6 72.9 119.9 167.0 Total 921.0 1,497.4 1,372.4 373.9 417.4 429.4 •Less than $500 thousand. 168.0 SPECIAL ANALYSIS P FEDERAL PUBLIC WORKS ACTIVITIES To aid in understanding the Federal role in construction programs of the Federal, State, and local governments, this analysis brings together information on budget authority and outlays for direct Federal public works and for Federal grants and loans to assist State and local construction. The analysis also includes a separate tabulation of outlays for major Federal programs to aid construction by private cooperatives and nonprofit groups. Federal activities that affect the level of private construction, such as Federal procurement, leases, loans, loan guarantees, interest subsidies, and tax concessions, are not included. Summary and background.—Federal outlays for public works are estimated to reach $11.3 billion in 1971, about $1 billion more than in 1970. All of the increase will be in civil construction programs. Outlays for defense public works will be held to about the same level as in 1970, but will be $221 million below the 1969 level. Larger outlays for civil public works reflect primarily budget recommendations for expansion in selected program areas to meet pressing economic and environmental problems. Major increases will be for airways and airports, urban mass transit facilities, and waste treatment plants. Outlays for water resources and power projects are also expected to rise as projects started in earlier years reach higher construction levels. Most other construction programs are being held at or below theii 1970 levels. Table P-l shows Federal outlays for public works, including net lending, over a 10-year period; the accompanying chart indicates trends in outlays for the three major segments—grants in aid, direct Federal civil works, and defense construction. Table P-1. FEDERAL OUTLAYS FOR PUBLIC WORKS, 1962-71 (in millions of dollars) Total Federal outlays Fiscal year 1962 1963 1964 _ 1965. 1966. 1967 1968 1969 .__ 1970 estimate.. 1971 estimate.. __ . . 6,938 7,196 8,346 8,886 9,428 9,572 9,520 9,683 10,336 11,331 Direct Federal construction Total 3,693 3,704 4,019 4,152 4,693 4,483 3,972 3,932 3,964 4,486 Civil 2,085 2,321 2,691 2,800 3,014 2,752 2,460 2,186 2,426 2,961 Grants 1,608 1,383 1.328 ,352 ,679 ,731 ,513 ,746 ,538 57.5 Net lending Defense 3,037 3,302 4,186 4,567 4,446 4,730 5,264 5,479 6,048 6,508 207 190 142 167 289 359 284 111 324 337 Note.— In this and the following tables, nonconstruction costs are excluded; proposed legislation is included for the years 1970 and 1971. Details may not add because of rounding. Net lending in years prior to 1967 does not reflect those repayments deposited to miscellaneous receipts, which for 1967 and later years are netted against disbursements. 236 237 SPECIAL ANALYSES Federal Expenditures for Public Works $ Billions 7.06.5 6-0 Civil 6.0 • Grants 5.5 5.0- 4.0 - 3.0 3.0 2.2 2.4 2.0 1.0- 1962 1963 Fiscal Years 1964 1965 1966 1967 J968 1969 1970 1971 Estimate In most construction programs, outlays lag behind new budget authority because of the time required for project construction. New authority of $17.9 billion is recommended for public works programs in the 1971 budget, $6.7 billion more than in 1970. Most of the increase is accounted for by major new proposals to provide authority for multiyear programs needed to control water pollution, modernize and expand mass transit facilities in our major cities, and improve our air transportation system. Construction is defined to include the design and production of fixed structures and physical improvements to land, including new works and major additions, alterations, or improvements of existing works. Public works figures in this analysis include detailed project planning and the cost of sites for specific construction projects. Preliminary planning and surveys prior to selection of a site and generalpurpose land acquisitions, such as for parks and forests, are excluded, as are general maintenance and repair. Total private and public construction represents a large segment of the Nation's economic activity. In recent years, construction, including maintenance and repairs, has accounted for about 13% of the gross national product. The volume of public construction and the types of structures being built are of widespread interest because of the effect on the construction industry and on the level of economic activity. Currently, the public sector accounts for about one-third of total new construction put in place, as compared with one-sixth in 1947. Within the public sector, about one-eighth is direct Federal 238 THE BUDGET FOR FISCAL YEAR 1971 construction and the remainder is construction by State and local governments, much of which is financed with Federal assistance. The increasing dollar volume of public construction reflects in large measure growing Federal programs to assist in meeting State and local needs. By contrast, direct Federal construction has not made a relatively large contribution to recent growth. Available data indicate that Federal construction put in place was about 20% of the $20 billion total for public works in calendar year 1964 and about 12% of the $28 billion total in 1968. Over the same period, private construction increased from $46 billion to $57 billion, or 24%, while total public construction increased by 36%. DIRECT FEDERAL PUBLIC WORKS Outlays for direct Federal construction are shown by agency in table P-2. About two-thirds of 1971 outlays for direct Federal construction will be for civil programs of the Federal Government, with the remaining one-third for facilities of the Department of Defense and the Atomic Energy Commission. Restrictive budget policies have limited direct Federal construction for several years. In addition, in September 1969, the President directed Federal agencies to reduce new construction contracts by 75% to help relieve inflationary pressures on the construction industry and to release resources needed for housing and other private construction. State and local governments and businessmen also were urged to cut back their construction plans. Reports from Federal agencies indicate that a total of $1.5 billion of obligations for direct Federal construction are being deferred in 1970. Federal lease construction contracts which would have resulted in $300 million of private construction are also being deferred. Although budget policies have restrained direct Federal public works in recent year's, outlays in 1970 are now expected to be somewhat higher than in 1969, and to increase by over $500 million in 1971. The relatively sharp increase in 1971 reflects a number of factors: (1) many of the larger projects started in earlier years will reach a higher construction stage; (2) budget recommendations for new and expanded programs will increase outlays in selected areas; (3) the construction deferral curtailed 1970 outlays by some $300 million; and (4) continuing increases in construction costs contribute to larger outlays. Outlays would be even higher in 1971 had it not been for the effect of the 1970 cutback. Within the direct civil public works category, a number of agencies— principally the Corps of Engineers, the Bureau of Reclamation, the Bonneville Power Administration, and the Tennessee Valley Authority—are building water resource and related power generation and transmission facilities which account for well over half of total outlays for direct Federal civil works. Another large category of civil works consists of roads and other facilities required in connection with the national forests, parks, and other public lands. The General Services Administration builds most Federal office buildings. Research facilities are built by many of the other Federal agencies. The direct defense public works include facilities in the United States and abroad to support the missions of the armed services. The level of outlays for such purposes is being reduced in 1970 from the 1969 level, with little additional change anticipated in 1971. 239 SPECIAL ANALYSES Table P-2. DIRECT FEDERAL PUBLIC WORKS: OUTLAYS AND 1971 BUDGET AUTHORITY BY AGENCY (in millions of dollars) Outlays Program and agency 1969 actual 1970 estimate 1971 estimate Budget authority 1971 estimate Civil public works: Department of Agriculture: Forest Service Department of the Army: Corps of Engineers— Civil Department of Health, Education, and Welfare: Health Services and Mental Health Administration Department of the Interior: Bureau of Indian Affairs__ National Park Service _-_ Bureau of Reclamation Bonneville Power Administration Post Office Department Department of Transportation: Coast Guard _ _ Federal Aviation Administration General Services Administration National Aeronautics and Space Administration.. Veterans Administration Tennessee Valley Authority Other _ 104 120 140 118 840 814 982 891 24 29 29 18 48 42 200 109 37 61 38 175 98 93 60 33 224 94 165 14 17 197 91 308 46 11 130 65 58 278 131 41 134 143 60 93 364 162 36 246 162 72 71 496 151 17 274 169 35 77 223 104 2,186 2,426 2,961 2,551 436 425 494 146 2 243 436 308 334 165 2 293 463 306 315 163 1 275 668 331 309 265 Subtotal national defense public works 1,746 1,538 1,525 1,752 Total direct Federal public works 3,932 3,964 4,486 4,303 Subtotal civil public works. National defense public works: Department of the Army... Department of the Navy Department of the Air Force Interservice activities Civil defense centers and shelters Atomic Energy Commission 178 GRANTS AND N E T LENDING FOR PUBLIC WORKS Federal outlays to aid State and local government construction are summarized by agency in table P-3. Federal grants and loans supplement State and local resources and provide incentives to build roads; water, waste treatment and sewer facilities; airports, hospitals, schools and other facilities. Many Federal-aid programs now require that projects proposed for Federal support be consistent with comprehensive planning for development of the area or region. To facilitate this objective, the Department of Housing and Urban Development will contract to provide $60 million in comprehensive planning grants to State and local governments in 1971. 240 THE BUDGET FOR FISCAL YEAR 1971 Table P-3. GRANTS AND NET LENDING FOR PUBLIC WORKS: OUTLAYS AND 1971 BUDGET AUTHORITY, BY AGENCY (in millions of dollars) Outlays Program and agency Grants to State and local governments: Funds appropriated to the President: Appalachian regional development programs Department of Agriculture: Soil Conservation Service Farmers Home Administration Department of Commerce: Economic development assistance Department of the Army: Corps of Engineers— Civil Department of Health, Education, and Welfare: Health Services and Mental Health Administration National Institutes of Health Office of Education . Department of Housing and Urban Development.. Department of the Interior: Bureau of Outdoor Recreation Office of Territories Federal Water Pollution Control Administration. Department of Justice: Law Enforcement Assistance Administration Department of Transportation: Federal Aviation Administration Federal Highway Administration Urban Mass Transportation Administration Washington Metropolitan Transit Authority Other civil _ Subtotal civil grants. _ Department of Defense Total grants _ Lending to State and local governments: Department of Commerce: Economic development assistance _. Department of Health, Education, and Welfare: Office of Education Department of Housing and Urban DevelopmentDepartment of the Interior: Bureau of Reclamation Department of Transportation: Federal Highway Administration District of Columbia __ _ Other .. Repayments and other __ Total net lending 1969 actual Budget authority 1971 estimate 1970 estimate 1971 estimate 138 204 222 221 67 27 79 84 37 77 26 156 156 8 7 22 88 126 15 40 136 20 118 53 289 91 131 127 300 146 130 130 275 186 200 27 17 139 40 23 166 38 32 366 31 30 4,005 2 11 19 136 6 8 92 4,372 127 20 12 139 4,289 254 122 15 220 5,395 2.740 180 28 5,466 13 6,037 12 6,495 14 13,447 18 5,479 6,048 6,508 13,465 19 38 23 38 41 440 32 734 36 536 6 5 5 4 67 9 -309 40 109 6 -640 35 150 5 -454 100 28 4 -3 272 324 337 171 104 4,106 Federal grants vary by program. The Federal share is commonly expressed as a percentage of the total project cost, and may be uniform for all projects in some programs or variable in others in accordance with such factors as population and relative financial ability of the States. SPECIAL ANALYSES 241 By far the largest outlays for construction grants are those of the Federal Highway Administration in the Department of Transportation, which administers several highway programs financed from trust funds. The National System of Interstate and Defense Highways—a 42,500mile network of limited access roads—is nearing completion and now has 28,750 miles open to traffic. An additional 5,259 miles of this system are under construction, and 6,615 miles are in engineering design or right-of-way acquisition status. The Federal share of the cost of this system is 90%. For most other highway programs, the Federal share is 50%. The Federal Aviation Administration administers a program providing for 50% of the cost of certain airport facilities. Legislation is recommended to provide matching grants and increased user charges to help finance new airport facilities estimated to cost $5 billion over the next 10 years. The Urban Mass Transportation Administration provides grants for up to two-thirds of net project costs of mass transportation facilities. Legislation is proposed to provide contract authority of $3.1 billion over 5 years to permit communities to arrange in advance for their share of new project costs. Within the Department of Health, Education, and Welfare, the Office of Education provides grants for higher education facilities and libraries on a matching basis, and for elementary and secondary schools on the basis of the increased number of children of Federal employees. No new budget authority is being requested for these programs in 1971. A major reform is being proposed in the program of assistance to schools in federally affected areas, and greater use will be made of Federal interest subsidy grants on private loans for higher education facilities. The Health Service and Mental Health Administration administers grants for public hospitals and mental health centers, and the National Insitutes of Health provide grants for teaching facilities in the health professions, and for health research and library facilities. The Department of Housing and Urban Development provides grants for basic water and sewer facilities and neighborhood facilities. In the Department of the Interior, grant programs are administered by the Federal Water Pollution Control Administration for waste treatment works and related research facilities, and by the Bureau of Outdoor Recreation for recreation facilities. As part of the major new proposals to improve environmental quality, legislation is recommended to provide $4 billion of contract authority over 5 years to the Department of the Interior for grants to communities for the construction of waste treatment works. Of that amount, $800 million would be allocated in 1971 and in each of the succeeding four fiscal years. The total Federal share would stimulate about $10 billion of construction. Federal loans on favorable terms are also available to State and local governments for construction of certain types of public works such as public housing, water and sewer developments, and urban rehabilitation. CIVIL PUBLIC WORKS The following sections provide additional details on civil works construction. For most direct Federal projects, the need for construction is determined by preliminary studies and surveys by the responsible agencies. For many of the larger projects, such studies become the 390-700 O—70 16 242 THE BUDGET FOR FISCAL YEAR 1971 basis for specific authorizing legislation required before appropriations may be enacted. In other programs, individual projects are considered authorized on the basis of general legislation. New and continuing work.—For projects underway in 1971, table P—4 indicates the total cost, the progress through the budget year, and the estimated outlays required to complete the projects. Table P-4. ESTIMATED COST OF 1971 DIRECT FEDERAL CIVIL PUBLIC WORKS, BY CONTINUING AND NEW WORK (in millions of dollars) Program and agency Continuing work: Department of Agriculture: Forest Service Department of the Army: Corps of Engineers— Civil _ _ Department of Health, Education, and Welfare: Health Services and Mental Health Administration Department of the Interior: Bureau of Indian Affairs National Park Service Bureau of Reclamation _ Bonneville Power Administration. _ _ _ _ _ _ _ Post Office Department _ Department of Transportation: Coast Guard Federal Aviation Administration General Services Administration _ National Aeronautics and Space Administration Veterans Administration Tennessee Valley Authority.__ __ Other Total continuing work New projects and features in 1971: Department of Agriculture: Forest Service Department of the Army: Corps of Engineers— Civil -.-_ Department of Health, Education, and Welfare: Health Services and Mental Health Administration Department of the Interior: Bureau of Land Management Bureau of Indian Affairs _ _ _ __ Bureau of Reclamation __ _ Bonneville Power Administration Department of Justice: Federal Prison System Post Office Department _ _ _ __ Department of Transportation: Coast Guard Federal Aviation Administration. Treasury Department General Services Administration National Aeronautics and Space Administration. __ Veterans Administration _ __ __ Tennessee Valley Authority Other __ Total new projects and features.. __ Total estimated Federal cost Outlays Prior to 1971 Required to complete 1971 estimate 188 120 68 15,202 7,645 944 6,613 88 43 24 22 679 424 33 54 31 219 1,427 7,558 586 284 4,129 278 143 200 1,363 3,210 221 37 87 104 145 90 27 28 471 538 1,265 319 1,624 1,556 134 232 1,155 160 501 892 122 127 68 39 444 117 216 179 43 119 31,930 15,979 2,475 13,479 72 78 17 784 18 5 13 17 9 6 3 11 48 36 150 829 27 52 2 2 42 17 336 * 6 1 38 15 320 19 102 30 58 60 25 2,099 * 8 124 3 15 3 23 50 9 29 384 * 680 548 6 15 297 7 196 16 87 27 35 10 15 1,681 = 243 SPECIAL ANALYSES Table P-4. ESTIMATED COST OF 1971 DIRECT FEDERAL CIVIL PUBLIC WORKS, BY CONTINUING AND NEW WORK (in millions of dollars)— Continued Program and agency Total estimated Federal cost Outlays 1971 estimate Prior to 1971 Required to complete Advance planning and site acquisition prior to start of construction: Department of the Army: Corps of Engineers— CiviL... Department of Health. Education, and Welfare: Health Services and Mental Health Administration Social Security Administration Department of the Interior: Bureau of Land Management Bureau of Indian Affairs ._ . Bureau of Sport Fisheries and Wildlife National Park Service ___ Bureau of Reclamation _ Department o{ justice: Federal Prison System Post Office Department Department of Transportation: Coast Guard General Services Administration National Aeronautics and Space Administration.. Veterans Administration Tennessee Valley Authority Other Total advance planning Total direct civil public works 85 26 21 39 7 3 2 1 1 5 2 5 2 5 30 3 3 2 * 3 5 25 31 3 6 3 * 22 7 72 2 141 11 20 3 10 87 3 1 1 2 7 22 1 20 2 9 2 5 434 134 102 202 34,463 16,142 2.961 15,361 50 1 35 6 10 2 'Less than $500 thousand. Outlays for those projects which were started in years prior to 1971 are estimated at $2.5 billion in 1971,. about 84% of the total for direct civil works construction. An additional $13.5 billion of outlays is estimated to be required after 1971 to complete these projects. New projects recommended for starting in 1971 are estimated to cost $2.1 billion, of which $384 million will be spent in 1971. The 1971 budget includes provision for the Corps of Engineers to begin 16 projects and for the Bureau of Reclamation to initiate three new projects and one project resumption. The Tennessee Valley Authority will start a flood control project and two generating units as well as other improvements. The Bonneville Power Administration will add substation and transmission capacity to the Federal electric power grid in the Pacific Northwest. The General Services Administration will start 12 new public buildings and the superstructures of three others, and the Post Office Department will begin 29 post offices. The Bureau of Prisons will replace the New York Detention Center and will begin planning, and in some instances acquire sites, for six additional prisons or correctional centers. The Government Printing 244 THE BUDGET FOR FISCAL YEAR 1 9 7 1 Office will acquire a site and develop plans for a new plant in the Washington metropolitan area. Public works planning and surveys.—Prior to undertaking construction, preliminary planning, surveys, and investigations are generally required. Before construction of individual water resource projects, coordinated long-range economic, hydrologic, and land-use projections are also employed in comprehensive river basin planning to help assure economic design of facilities. As indicated earlier, outlays for such studies are not included in the summary tables in this analysis. Outlays for advance planning and site acquisition for projects to be undertaken after 1971 are shown in table P-4. Authorized reserve of civil public works.—Most agencies that regularly build civil works projects maintain an authorized reserve which is drawn upon as necessary to fulfill program needs and budgetary policy. Projects in such reserve status require only appropriations and detailed planning for starting. The current planning status of the authorized reserve is summarized in table P-5. Table P-5. RESERVE OF PRESENTLY AUTHORIZED PROJECTS AND PROGRAMS FOR UNDERTAKING AFTER 1971 (in billions of dollars) Agency Agriculture: Forest Service Army: Corps of Engineers— Civil Health, Education, and Welfare: Health Services Interior: Bureau of Land Management. _ Bureau of Sport Fisheries and Wildlife Bureau of Reclamation. Bonneville Power Administration. _ Post Office Transportation: Federal Aviation Administration _ General Services Administration. Veterans Administration Tennessee Valley Authority Other agencies Total Estimated total Federal cost Status of plans as of June 30. 1971 Status of plans as of June 30. 1970 Contract could be let In process 0.9 0.2 0.7 9.2 2.4 5.4 .2 * .2 .3 1.9 Contract could be let In process 0.3 0.7 1.4 3.1 4.9 1.2 .1 .1 * .1 .1 * .1 .2 * .1 .1 * 1.2 .2 .2 .2 .4 * 1.4 .1 .5 .2 * .1 .4 .7 .2 .5 .9 .9 .3 2.4 .3 .1 .2 * .2 * .2 .7 * 18.6 4.6 Not started .5 .5 Not started .4 .3 .3 .4 .1 * .2 2.1 .2 .2 .5 * .8 * .1 1.5 .2 8.1 5.9 6.7 7.6 4.3 .6 .4 .1 *Less than $50 million. Civil public works by function.—Table P-8 at the end of this analysis provides detailed information on budget authority and outlays for public works programs by agency and program grouped according to 245 SPECIAL ANALYSES the major functional categories used in the budget. Each major function, with the exception of interest, includes public works programs, although the level of budget authority and outlays varies widely. Only two civil functions—commerce and transportation and natural resources—include public works activities with outlays in excess of a billion dollars. In 1971, these two functions taken together account for $8.1 billion or 83% of the total $9.8 billion of outlays for civil construction. Direct construction—principally of water resources projects—is the major component of the natural resources construction activities. The trend of outlays for the major types of water resource developments is shown in the accompanying chart, and table P-6 provides details for the individual agencies and types of developments. Outlays for Water Resources and Related Developments $ Billions 2.5 2.0- 1.5- Multiple-purpose with Hydroelectric Power 1.0- .5Flood Control and Beach Erosion 1962 1963 Fiscal Years I I i L 1964 1965 1966 1967 1968 1969 1970 1971 Estimate Some of the remaining civil functions—such as the international veterans, space, and income security functions—include principally direct Federal construction. Others—such as community development and housing, education and manpower, and health functions—include principally programs to aid State and local construction. Taken together, outlays for construction activities in the former group are estimated at $185 million in 1970 and at $166 million in 1971, or a decrease of 10%. In the latter group taken together, outlays are estimated at $953 million and $950 million, a negligible change from 1970 to 1971. 246 THE BUDGET FOR FISCAL YEAR 1971 Table P-6. OUTLAYS FOR WATER RESOURCES AND DEVELOPMENTS (in millions of dollars) Program and agency 1969 actual Flood control works: Agriculture: Soil Conservation Service (mostly grants) _. Army: Corps of Engineers—Civil __ Grants Interior: Bureau of Reclamation.. _ _. State: International Boundary and Water Commission. Tennessee Valley Authority RELATED 1970 estimate 1971 estimate 66.6 289.6 15.1 10.6 7.0 8.0 79.1 316.2 20.4 3.0 .4 9.2 84.1 417.6 7.9 3.3 3.8 6.7 396.9 1.5 428.3 3.7 523.4 2.6 16.1 16.8 16.9 8.2 79.0 4.4 4.0 56.7 4.2 6.0 64.6 3.9 107.7 81.7 91.4 204.1 203.6 196.5 .2 .1 .3 .7 .3 204.4 203.9 197.5 Multiple-purpose dams and reservoirs with hydroelectric power facilities: Army: Corps of Engineers—Civil _ _. Interior: Bureau of Reclamation.. Tennessee Valley Authority __ 300.5 65.9 12.2 254.3 65.0 13.7 313.2 111.7 10.4 Total multiple-purpose facilities Thermal-electric powerplants: Tennessee Valley Authority. 378.6 184.4 333.0 262.3 435.3 388.6 24.6 64.1 25.1 98.4 4.7 71.6 94.2 3.6 74.8 202.6 199.8 184.7 24.4 34.0 30.8 80.2 39.5 119.0 35.7 146.0 35.0 Total flood control works Beach erosion control: Army: Corps of Engineers—CivilIrrigation and water conservation works: Agriculture: Soil Conservation Service (mostly grants). Interior: Bureau of Indian Affairs Bureau of Reclamation Loan and grant program _ _ Total irrigation works. Navigation facilities: Army: Corps of Engineers—Civil Transportation: Saint Lawrence Corporation Tennessee Valley Authority— Seaway Development _ Total navigation facilities. Power transmission facilities: Interior: Bureau of Reclamation Bonneville Power Administration Southwestern Power Administration. Tennessee Valley Authority. Total power transmission facilities. Water supply and waste disposal facilities: Agriculture: Farmers Home Administration (grants) Housing and Urban Development: Grants Loan disbursements Interior: Bureau of Reclamation Federal Water Pollution Control Administration (grants). State: International Boundary and Water Commission Total water supply and waste disposal Total water resources and related developments. 109.4 4.5 12.1 19.9 25.4 134.5 .1 158.0 .4 32.4 322.5 .5 298.6 372.5 567.2 1,774.7 •1,885.2 247 SPECIAL ANALYSES NATIONAL DEFENSE PUBLIC WORKS Table P-8 also provides information on budget authority and outlays for national defense public works by agency and program. Department ojDefense—Military.—Outlays for construction required for strategic and general war forces and for general support are expected to decrease in 1970 and remain at about the same level in 1971. The figures shown reflect the impact of the deferral of 75% of new construction contracts in 1970, and the continued restraints in 1971. Budget authority of $1.6 billion is recommended in 1971 for new and replacement construction for the armed services, a 50% increase over the 1970 level. This includes the design and construction of facilities required for the Safeguard antiballistic missile system, for replacement of deteriorated hospital facilities, for new and improved troop housing, and for 8,000 new family housing units. Atomic Energy Commission.—Budget authority and outlays for construction of atomic energy facilities are expected to decline slightly from 1970 to 1971. Work will continue on the world's largest accelerator for research in high-energy physics and on a medium-energy accelerator as well as facilities for the fast breeder civilian power reactor development program. In 1971, design will begin on a project to increase the capacity of the uranium enrichment plants as part of the long-term Cascade Improvement Program. AID TO COOPERATIVES AND NONPROFIT GROUPS In some instances, Federal aid programs provide support to private nonprofit institutions which provide services similar to those furnished by State and local governments. Table P-7 provides information on Federal outlays to aid construction by such private institutions. These outlays are not included in the totals for public works in other parts of this analysis. Table P-7. FEDERAL OUTLAYS FOR CONSTRUCTION BY COOPERATIVES AND NONPROFIT GROUPS (not included in public works) (in million* of dollar*) Program and agency 1969 actual 1970 1971 Expenditures: Grants for private construction: Department of Health, Education, and Welfare: Health Services and Mental Health Administration: Medical facilities construction National Institutes of Health: Health educational research and library facilities Office of Education: Higher education facilities Gallaudet CollegeHoward University Total expenditures 150 158 137 80 69 1 3 64 64 2 7 65 59 1 19 303 295 281 248 THE BUDGET FOR FISCAL YEAR 1971 Table P-7. FEDERAL OUTLAYS FOR CONSTRUCTION BY COOPERATIVES AND NONPROFIT GROUPS (not included in public works) (in millions of dollars)—Con. Program and agency 1969 actual 1971 estimate 1970 estimate Lending: Department of Agriculture: Rural Electrification Administration : Electrification and telephone facilities.__ Department of Health, Education, and Welfare: Health Services and Mental Health Administration: Medical facilities Office of Education: Higher education facilities Department of Housing and Urban Development: College housing- _ _ _ _ Repayments.. 402 505 492 54 1 52 15 67 91 -198 124 -185 51 -198 348 496 427 651 791 708 Total net lending Total Federal outlays .__ Table P-8. FEDERAL PUBLIC WORKS ACTIVITIES (in millions of dollars) By major function and agency OUTLAYS BUDGET AUTHORITY Function, agency, and program 1969 1970 1971 1969 1970 1971 CIVIL PUBLIC WORKS International Affairs and Finance Department of State: Foreign Service buildings Cultural and Technical Interchange Center, Hawaii (grant) International Center, Washington, D.C. (grant) United States Information Agency: Radio facilities and special international exhibitions Total international finance 3.6 1.1 3.2 3.2 .7 .2 3.1 .2 .2 7.7 12.3 7.3 1.0 affairs and 1.1 1.0 3.6 11.6 16.0 10.7 32.9 53.2 34.6 65.3 60.0 72.0 Space Research and Technology National Aeronautics and Space Administration: Research and space flight facilities __ __ - 70-15 249 SPECIAL ANALYSES Table P-8. FEDERAL PUBLIC WORKS ACTIVITIES (in millions of dollars)—Con. By major function and agency BUDGET AUTHORITY Function, agency, and program 1969 actual OUTLAYS 1970 1971 estimate estimate 1969 actual 1.6 11.2 12.1 8.9 1.7 1.0 1.4 1970 1971 estimate estimate CIVIL PUBLIC WORKS—Continued Agriculture and Rural Development Department of Agriculture: Laboratories, research facilities, and Library Cooperative State Research Service: Grants for research facilities Soil Conservation Service: Resource conservation and development: Grants. Farmers Home Administration: Grants for rural water and sewer systems Rural renewal loans Grants for farm labor housing Total agriculture and rural development Natural Resources Department of Agriculture: Soil Conservation Service: Flood prevention and watershed protection: Direct work Grants Forest Service: Roads, research, recreational and protective facilities1 Department of Defense—Civil: Corps of Engineers—Civil: Flood control, navigation and multiplepurpose projects with power Trust funds Grants Department of the Interior: Bureau of Land Management: Roads and other facilities -_ Bureau of Outdoor Recreation: Grants for recreation facilities Office of Coal Research: Demonstration plants - __ _Bureau of Commercial Fisheries: Facilities Grants Bureau of Sport Fisheries and Wildlife: Facilities National Park Service: Parkways, roads, buildings and utilities * Bureau of Reclamation: Irrigation and multiple-purpose projects with power * _ _ __ Loans, small irrigation projects Repayments Grants, small irrigation projects See foo end of table. .5 3.6 1.0 .8 4.3 7.4 2.9 3.5 4.0 28.0 1.3 4.2 46.0 24.0 2.5 34.0 .7 5.7 30.8 2.5 24.4 1.2 2.7 34.9 ===== 57.4 35.5 44.1 57.0 51.1 .2 59.2 .2 65.5 .1 69.1 .2 63.7 .2 75.6 .4 80.3 179.6 187.9 117.9 104.0 120.4 140.0 838.3 18.7 15.1 740.4 15.8 20.4 862.9 27.6 6.6 815.6 24.6 15.1 795.7 18.2 20.4 952.3 29.6 7.9 18.9 16.1 14.6 13.1 17.4 15.9 22.5 30.9 31.2 26.7 40.0 38.1 2.5 7.8 8.0 1.0 10.1 7.2 1.2 2.3 1.0 .8 .7 .8 2.7 1.9 .7 1.4 1.9 4.3 2.6 4.5 3.4 5.8 5.7 50.3 17.0 42.2 38.1 33.3 197.2 3.0 -1.3 299.0 5.3 -1.4 .4 197.1 4.4 -1.4 200.0 5.7 -1.3 175.3 5.1 -1.4 .4 224.0 5.3 -1.4 6.0 250 THE BUDGET FOR FISCAL YEAR 1971 Table P-8. FEDERAL PUBLIC WORKS ACTIVITIES (in millions of dollars)—Con. By major function and agency BUDGET AUTHORITY 1969 actual 1970 1971 OUTLAYS 1970 1969 1971 estimate CIVIL PUBLIC WORKS—Continued Natural Resources—Continued Department of the Interior—Continued Power transmission facilities: Bonncville Power Administration * Southwestern Power Administration._ Federal Water Pollution Control Administration: Buildings and facilities _ Grants for waste treatment works and research facilities. _ Department of State: International Boundary and Water Commission: Water resources projects and Chamizal settlement_ Facilities for International Pacific Halibut Commission (grant) _ Tennessee Valley Authority: Power, water resources, and chemical facilities Total natural resources 103.0 4.0 220.5 5.8 109.4 4.5 98.4 4.7 94.2 3.6 .5 2.2 1.8 803.8 4,004.9 139.2 166.4 366.5 4.2 9.2 .9 4.2 364.4 496.0 96.9 3.1 .4 90.9 2.2 .2 27.2 24.6 223.2 277.9 ,723.2 2.375.0 5,683.9 1,857.4 1,960.5 2,507.1 Commerce and Transportation Funds appropriated to the President: Appalachian regional development programs: Grants for highways, education, and health facilities Public works acceleration: Grants Department of Commerce: Economic development assistance: Development facilities grants Development facilities loans __ Repayments Environmental Science Services Administration : Structures Bureau of Standards: Buildings Maritime Administration: Improvements Department of Defense—Civil: Panama Canal Company: Canal and harbor improvements _ __ _ Department of the Interior: Bureau of Indian Affairs: Roads Post Office Department: Post offices, improvements and alterations Department of Transportation: Coast Guard: Shore facilities and navigation aids _ __ Federal Aviation Administration: Air traffic control, navigation and research facilities Dulles and National Airports See footnotes at end of table. 310.6 220.4 221.4 137.5 2.0 203.6 4.2 221.6 153.6 26.4 152.9 21.6 156.3 38.0 125.9 18.6 -.6 136.3 37.6 -.4 156.0 23.2 -.4 .1 .9 3.4 .2 .5 .1 2.3 .4 2.7 1.0 .8 .2 (2) 13.3 14.5 14.4 18.8 21.1 20.0 30.0 30.0 89.7 199.3 308.3 36.5 93.2 164.6 42.3 28.2 16.9 46.4 41.3 36.2 120.0 .7 224.0 1.9 190.0 11.0 70.9 1.4 132.0 135.0 6.0 251 SPECIAL ANALYSES Table P 8. FEDERAL PUBLIC WORKS ACTIVITIES (in millions of dollars)—Con. By major function and agency BUDGET AUTHORITY OUTLAYS Function, agency, and program 1969 I I 1970 ' 1971 1969 I 1970 I 1971 CIVIL PUBLIC WORKS—Continued Commerce and Transportation—Con. Department of Transportation—Con. Federal Aviation Administration—Con. Federal-aid airport program: Grants.. Proposed legislation for airways and airport development: Direct work Grants Federal Highway Administration: Forest and public land highway grants 3 _ _ Chamizal Memorial Highway: Grant Federal-aid highways and other trust funds: Grants Loans - . Alaskan highway grant and other Federal Railroad Administration: Alaska 70.0 46.5 11.0 46.9 103.7 80.0 72.5 220.0 46.6 -136.2 4.0 Total commerce and transportation. 89.0 2.3 105.0 50.0 31.7 4.0 .9 5,376.6 5,348.2 5,531.0 4,067.6 4,336.1 4,284.7 40.0 35.0 100.0 100.0 100.0 3.0 .6 .6 Urban Mass Transportation Administration: Transportation facilities: Grants Loans _. Repayments St. Lawrence Seaway Development Corporation: Alterations Federal Communications Commission: Facilities _ 38.0 90.0 148.3 (') 150.7 2,740.0 .1 253.8 -.2 126.8 1.0 -.2 .2 .3 .7 136.1 .1 (') -.3 (*) 6,516.7 6,668.8 9,470.0 4,819.5 5,319.7 5,599.6 Community Development and Housing Department of Housing and Urban Development: Grants for neighborhood facilities Low-rent public housing: Loans. . . _ _ _ _ _ _ _ Repayments. _ New community development grants Grants for water and sewer facilities Public works planning: Loans _ __ Repayments and other. Public facility loans Repayments Liquidating programs: Repayments... Federal Home Loan Bank Board: Headquarters _ Total community development and housing _ See footnotes at end of table. 35.0 165.0 3.2 26.0 38.0 40.0 2.5 135.0 285.8 598.0 423.0 -273.1 -598.0 -411.0 2.0 10.0 .5 80.2 119.0 146.0 150.0 3.3 3.2 8.4 203.2 10.6 40.0 189.2 203.2 5.2 -6.2 47.8 -3.8 -.2 7.4 -6.0 42.0 -4.7 -.2 3.6 -5.0 40.0 -5.8 -.2 .4 .4 5.4 146.6 184.4 236.0 252 THE BUDGET FOR FISCAL YEAR 1 9 7 1 Table P-8. FEDERAL PUBLIC WORKS ACTIVITIES (in millions of dollars)—Con. By major function and agency OUTLAYS BUDGET AUTHORITY 1969 1970 1971 1969 1970 1971 estimate CIVIL PUBLIC WORKS—Continued Education a n d Manpower Department of Health, Education, and Welfare: Office of Education: Schools in federally affected areas: At Federal installations Grants ___ Higher education facilities: Grants.. _ _ _ _ _ _ ___ Loans _ ____ Repayments. _ Community education facilities (grants) Department of Housing and Urban Development: College housing loans. Repayments Department of the Interior: Bureau of Indian Affairs: Schools and other facilities National Science Foundation: Research facilities Smithsonian Institution: John F. Kennedy Center for Performing Arts Museums Total education and manpower 2.4 20.0 6.5 33.3 5.8 26.7 247.0 40.5 -1.0- 244.0 32.5 -1.5 236.8 36.0 -1.9 9.2 22.4 22.7 11.6 200.0 101.2 -19.5 86.3 —20.7 68.9 -22.0 13.0 1.1 79.6 33.0 11.1 3.0 43.0 25.3 26.2 14.3 29.3 39.6 39.5 4.3 1.3 4.6 5.9 5.9 3.0 14.9 12.5 1.3 1.3 16.3 3.9 12.6 6.0 10.7 380.4 98.4 20.2 468.4 467.0 415.1 .4 4.5 6.5 Health Department of Health, Education, and Welfare: Consumer Protection and Environmental Health Services: Buildings Health Services and Mental Health Administration: Grants for mental health centers Grants for medical facilities Indian health facilities. _ Grants for Indian health facilities Other facilities, including St. Elizabeths Hospital* National Institutes of Health: Grants for health, educational research, and library facilities Buildings and facilities Social Security Administration: Buildings and district offices (trust funds) Total health See footnotes at end of table. .3 7.2 114.5 17.3 .9 14.0 67.5 19.0 2.0 22.5 18.0 13.6 104.2 14.3 .3 15.6 114.0 22.8 1.2 16.1 112.4 22.4 1.4 .2 2.3 .1 9.2 6.3 6.7 65.6 88.3 1.0 88.3 53.3 1.0 127.3 7.4 130.4 1.9 2.2 1.1 2.2 1.1 196.6 130.0 301.4 298.9 205.7 196.3 253 SPECIAL ANALYSES Table P-8. FEDERAL PUBLIC WORKS ACTIVITIES (inmillionsof dollars)—Con. By major function and agency OUTLAYS BUDGET AUTHORITY 1969 1970 * * 1971 1969 1970 * 1971 stimate CIVIL PUBLIC WORKS—Continued Income Security Social Security Administration: Buildings and district offices (trust funds) Total income security 7.9 9.5 6.2 7.9 9.5 6.2 7.9 9.5 6.2 7.9 9.5 6.2 1.0 .7 .2 .2 1.2 .1 4.1 1.7 1.2 1.1 1.5 .2 19.4 86.9 76.8 57.6 92.7 70.8 4.0 4.0 7.5 1.8 .8 4.0 .1 5.0 25.1 91.2 85.6 65.9 99.2 77.5 1.2 6.3 15.6 2.1 3.8 9.6 Veterans Benefits and Services Department of Defense—Civil: Army: Cemeteries Soldiers' Home (trust fund). Veterans Administration: Medical care facilities Construction of State nursing homes grants Corregidor-Bataan Memorial Total veterans benefits and services. General Government Legislative Branch: Architect of the Capitol: Buildings and James Madison Library - Government Printing Office: Building 3.4 3.9 Department of Defense—Civil: Army: Power and water systems, Ryukyu Islands: Loans Repayments _. . Canal Zone Government: Improvements. Department of the Interior: Office of Territories: Public facilities in Samoa, Guam, and the Trust Territory of the Pacific Islands: Grants Loans Repayments Department of Justice: Immigration and Naturalization Service: Border facilities Federal Prison System: Prison facilities. Law Enforcement Assistance Administration: Grants for police stations, correctional institutions and court buildings Treasury Department: Federal Law Enforcement Training Center Bureau of Customs: Border facilities Bureau of Engraving and Printing: Air conditioning Bureau of the Mint: Philadelphia Mint. Secret Service: Training facilities See footnotes at end of table. -7.8 m 12.8 4.1 -.3 (2) .4 .8 -.4 1.5 4.3 -.2 3.2 -.4 3.1 30.4 23.5 4.5 4.6 __m ** - . 4 16.6 7.4 -.3 22.6 4.8 -.3 32.0 5.3 _ 4 .3 1.2 1.6 23.7 2.7 .2 2.9 1.3 9.8 13.0 19.0 2.0 11.0 1.0 .1 5.0 .2 .4 .1 3.1 .2 .3 5.7 .6 1.8 .7 -.2 1.3 1.8 .7 (*) .4 5.0 .1 254 THE BUDGET FOR FISCAL YEAR 1971 Table P-8. FEDERAL PUBLIC WORKS ACTIVITIES (in millions of dollars)—Con. By major function and agency OUTLAYS BUDGET AUTHORITY Function, agency, and program 1969 actual 1970 estimate 62.9 69.6 168.5 130.3 .1 142.9 (*) 162.2 .9 73.5 -2.6 .1 61.5 -5.7 20.0 27.5 -4.0 .9 67.4 -2.6 .1 109.0 -5.7 7.3 149.9 -4.0 43.8 126.1 180.0 6.1 19.9 122.1 189.8 304.8 4%. 7 240.5 312.5 518.1 1971 1969 actual 1970 1971 estimate estimate CIVIL PUBLIC WORKS—Continued General Government—Continued General Services Administration: Construction of public buildings, sites and Central Intelligence Agency: Headquarters. District of Columbia: Grants Loans Repayments Grant to Washington Metropolitan Area Transit Authority Total general government. Total civil public works.. _ 9,320.9 10,045.3 16,169.6 7,923.3 8,787.2 9,792.4 NATIONAL DEFENSE PUBLIC WORKS Department of Defense—Military: Interservice activities: Construction, Defense agencies Family housing Civil defense: Grants for emergency centers Federal emergency centers -. Army: Construction Construction, Army Reserve Construction, Army National Guard (grants) Navy: Construction — Construction, Naval Reserve Air Force: Construction Construction, Air Force Reserve Construction, Air National Guard 41.8 48.7 33.9 124.8 45.6 219.4 10.0 136.1 15.0 150.0 32.0 131.1 2.4 1.9 1.8 3.2 5.1 2.1 3.9 1.7 2.5 1.4 504.1 3.0 237.2 10.0 658.0 10.0 434.9 1.5 426.5 9.0 453.1 10.0 2.7 15.0 15.0 8.4 7.7 11.0 291.5 5.0 300.0 9.6 326.1 5.0 418.4 6.5 300.3 8.0 300.9 6.0 260.8 4.3 8.3 284.3 5.3 13.2 297.2 4.0 8.0 480.5 2.8 10.3 320.0 4.3 10.0 300.0 5.0 10.0 Total, Department of DefenseMilitary : - - . - — - 1,172.6 1,037.1 1.591.5 1.516.5 1,256.3 1,263.0 243.4 275.1 292.9 178.4 339.4 184.5 Atomic Energy Commission: Facilities Total national defense public works. 1,512.1 1,221.6 1,769.8 1,760.0 1,549.2 1,538.1 Total civil and defense public works. 10,832.9 11,266.9 17,939.4 9,683.3 10,336.4 11330.6 1 2 1 Includes small amounts from trust funds. Less than $50 thousand. Legislation proposed to include forest and public land highways in trust funds in 1971, and 1971 amounts are included in trust funds. SPECIAL ANALYSIS Q FEDERAL RESEARCH, DEVELOPMENT, AND RELATED PROGRAMS This analysis identifies Federal obligations and expenditures for the conduct of research and development and for facilities related to these activities. Total Federal obligations for research and development, including facilities, will be $15.8 billion in 1971 compared to $16.4 billion in 1970. Increases totaling $0.1 billion are provided for a number of civilian agencies. These are more than offset by decreases of $0.1 billion for the Department of Defense and of $0.6 billion for the National Aeronautics and Space Administration, primarily as a result of a decline in requirements for the manned lunar landing program. Total expenditures will decrease from $15.9 billion to $15.7 billion. The 1971 budget initiates efforts to make more effective use of the Federal research and development dollar and to foster research more directly related to the understanding and solution of a broad range of national problems. Emphasis is being placed on research and development relating to environmental, education, housing, transportation, and crime problems. In this process more attention has been given to research and development which can effectively assist in achieving both specific agency objectives and the broader goals of the administration. Research.—Total Federal obligations for the conduct of research will increase from $5.5 billion in 1970 to $5.8 billion in 1971. Expenditures will increase from $5.5 billion in 1970 to $5.6 billion in 1971. Obligations for Research 5 - 4 - 1969 1970 .1971 Estimate 255 256 THE BUDGET FOR FISCAL YEAR 1971 Table Q-1. CONDUCT OF RESEARCH 1 (in millions of dollars) Obligations Expenditures Department or agency 1969 actual Defense—Military functions National Aeronautics and Space Administration Health, Education, and Welfare.... Atomic Energy Commission National Science Foundation Agriculture Interior Commerce Transportation Veterans Administration. _ Office of Economic Opportunity Housing and Urban Development. _ Smithsonian Institution Justice Allother Total 1970 1971 estimate 1969 actual 1970 1971 estimate 1,401 1,425 1,493 1,462 1,401 1,461 ,308 ,174 417 1,530 1,139 424 277 272 176 65 1,461 1,312 490 1,428 1,259 ,086 256 253 155 54 50 48 11 6 16 3 418 344 286 190 46 6 58 5,198 5,540 151 264 169 56 64 18 4 16 3 42 63 51 55 12 8 17 4 54 5,172 5,450 31 21 20 10 12 18 262 257 ,153 424 284 55 38 48 76 71 62 55 22 417 5A 183 418 307 286 187 65 62 56 22 10 20 7 62 5,574 1 In this table and tables Q-2 and Q—3 "obligations" and "expenditures" for AEC are both accrued costs which approximate obligations and expenditures for analysis purposes. Detail in all tables may not add to totals due to rounding. For ease of comparison, tables Q— 2 and Q—4 are listed in the same agency sequence. Development.—The Federal Government finances development to design, fabricate, test, and evaluate prototypes of materials, devices, systems, or processes to accomplish specific agency missions. These include prototypes of complex devices such as military weapons, space vehicles, and nuclear reactors and of systems for such purposes as missile defense and communications. Total obligations for the conduct of development are estimated to decrease from $10.1 billion in 1970 to $9.4 billion in 1971. Expenditures will decrease from $9.8 billion in 1970 to $9.7 billion in 1971. Table Q-2. CONDUCT OF DEVELOPMENT (in millions of dollars) Expenditure! Obligations Department or agency Defense—Military functions National Aeronautics and Space Administration _ Health, Education, and Welfare Atomic Energy Commission National Science Foundation Agriculture. _ Interior __ . Commerce. _ __ Transportation. _ _ __ _ _ Office of Economic Opportunity Housing and Urban Development._ Justice Allother _ ... Total 1970 estimate 1971 estimate 6,180 6,115 6,134 1,838 167 901 16 15 52 17 138 59 39 19 2,870 89 989 18 15 46 18 53 39 8 2 2,336 112 923 15 15 48 16 78 25 14 4 1,903 140 901 13 15 53 16 49 60 34 40 54 10,090 9,425 10,360 9,742 9,407 1970 estimate 1971 estimate 6,271 6,305 6,104 2,682 93 989 18 14 57 17 73 24 12 3 2,394 117 923 17 15 51 18 127 46 22 7 34 10,285 1969 actual 1969 actual 92 52 25 10 257 SPECIAL ANALYSES Obligations for Development % Billions is 1961 1962 1963 1964 1965 1966 1967 1968 1969 Fiscal Yeats 1970 1971 Estimate Academic research and development.—In 1971, total Federal obligations for research grants and contracts in colleges and universities will increase by $114 million over 1970. It is anticipated that much of this increase will be utilized to assist those in academic institutions who wish to undertake research, within or across disciplines, related to a better understanding of the nature and impact of the problems faced by contemporary society. Table Q-3. SUPPORT OF RESEARCH AND DEVELOPMENT IN COLLEGES AND UNIVERSITIES (in millions of dollars) Expenditures Obligations Department or agency 1969 actual Health, Education, and Welfare National Science Foundation . DefenseAtomic Energy Commission National Aeronautics and Space Administration _ _ . _. . Agriculture All other Total 390-700 O—7C -17 1970 estimate 1971 estimate 604 219 243 101 641 213 225 100 653 230 224 97 88 81 98 144 61 55 131 69 70 105 80 87 1,532 1,426 1,449 1,475 1970 estimate 1971 estimate 663 210 247 101 617 225 223 100 678 270 220 97 128 62 60 110 70 73 1,471 1,418 1969 actual 258 THE BUDGET FOR FISCAL YEAR 1971 Research and development facilities.—Obligations and expenditures for research and development facilities are as follows: Table Q-4. RESEARCH AND DEVELOPMENT FACILITIES (in millions of dollars) (Dbligations Department or agency Defense—Military functions National Aeronautics and Space Administration Health, Education, and Welfare..„ Atomic Energy Commission _ National Science Foundation Agriculture _ _ Interior Commerce Transportation Veterans Administration _ All other Total 1969 1970 Expenditures 1971 1969 1970 1971 197 181 165 208 187 174 55 47 301 27 11 29 3 6 5 1 80 7 374 23 7 30 4 15 6 1 55 33 240 24 5 29 6 17 9 1 70 46 248 62 15 16 3 5 3 1 63 58 276 42 15 37 5 7 6 72 54 320 27 9 28 5 17 4 681 727 585 677 696 1 712 PROGRAMS OF AGENCIES WITH MAJOR RESEARCH AND DEVELOPMENT ACTIVITIES DEPARTMENT OF DEFENSE—MILITARY The total Department of Defense 1971 obligations for research and development, including facilities, will decrease by $148 million from the 1970 level reaching a total of $7,763 million. For the conduct of research, obligations in 1971 are estimated to increase by $68 million. Continued emphasis will be given to areas of particular military significance such as electronics, marine technology, propulsion technology, and guidance technology. Fundamental research providing scientific knowledge needed for advances in military technology will also be pursued. Obligations for development programs and operation of test and evaluation facilities will reach a level of $6,104 million in 1971, a decrease of $200 million below the 1970 level. This decrease reflects the completion or phasing down of development on operational systems such as the F - l l l and FB-111 aircraft, the Minuteman intercontinental ballistic missile system, and the Poseidon fleet ballistic missile system. Advanced and engineering development programs, however, show significant increases in 1971. These include the Air Force F-15 air superiority fighter; antiballistic missile technology; separate sea and land based tactical air defense systems; the S-3A carrier based antisubmarine aircraft; an undersea long-range missile system; and the subsonic cruise armed decoy. A more detailed explanation of development trends is given in the Budget Appendix on pages 294-300. 259 SPECIAL ANALYSES Table Q-5. DEPARTMENT OF DEFENSE—MILITARY DEVELOPMENT (in millions of dollars) Purpose and budget title Conduct of research and development: Research, development, test, and evaluation: Military sciences _ _ Aircraft and related equipment__ Missiles and related equipment Military astronautics and related equipment Ships, small craft, and related equipment Ordnance, combat vehicles, and related equipment _ Other equipment Program wide management and support Emergency fund _ Other appropriations _ Total, conduct of research and development, obligations. Total, conduct of research, included above. _ Total, conduct of development, included above. Research and development facilities, obligations _ Total obligations _ RESEARCH 1969 actual 584 1,055 2,427 1,064 330 351 1,161 309 1970 estimate AND 1971 estimate 391 540 1,607 2,324 678 290 314 1.146 336 75 429 573 1,664 2,227 482 376 329 1,159 348 50 389 7,672 1,401 6,271 7,729 1,425 6,305 7,597 1,493 6,104 197 7,869 181 7,910 1165 7,763 NATIONAL AERONAUTICS AND SPACE ADMINISTRATION All activities of the National Aeronautics and Space Administration are considered as research and development and are included in this analysis. Following completion of the expensive development phase of the Apollo lunar landing program and the planned suspension of Saturn V launch vehicle and spacecraft production, the emphasis on development within NASA will be shifting to the manned Apollo Applications Workshop program and to the technology studies required for a space shuttle and a space station. Manned lunar missions will be continued during 1971. Research funding for space sciences will support the design of unmanned experiments and instrumentation for the 1973 Venus/ Mercury and Pioneer-Jupiter missions. Increases will occur in space applications for synchronous meteorological satellites and for the experimental Earth Resources Technology Satellites scheduled for launch in the early 1970's. In cooperation with the Departments of Agriculture, Interior, and the Navy these satellites will be used to conduct experiments in the use of space acquired information in the management of natural resources. Work will continue on advancing capabilities in communications, navigation, traffic control, meteorology, and geodesy. NASA work on NERVA nuclear rocket engine development also increases in 1971. Related work on NERVA is conducted by the Atomic Energy Commission. 260 THE BUDGET FOR FISCAL YEAR 1971 Table Q-6. NATIONAL AERONAUTICS AND SPACE ADMINISTRATIONRESEARCH AND DEVELOPMENT (in million, of dollars) Program and type of activity Conduct of research: Manned space flight Space sciences Space applications Space technology Aviation technology Supporting activities Research and program management- 1969 1970 1971 82 290 102 158 95 154 372 181 319 131 144 96 144 430 157 309 157 127 102 155 454 Subtotal, conduct of research, budget plan_ Subtotal, conduct of research, obligations. _ Conduct of development: Manned space flight Space sciences Space applications Space technology Supporting activities Research and program management 1,253 (1,308) 1,445 (1,530) 1,461 (1,461) 2,096 51 7 28 138 276 851 62 8 32 146 258 1,317 74 24 37 147 238 Subtotal, conduct of development, budget plan_ Subtotal, conduct of development, obligations. _ Research and development facilities, budget plan Research and development facilities, obligations 2,596 (2,682) 2,357 (2,394) (55) (80) 1,838 (1,838) 35 (55) Total budget plan 1 . 3,881 3,855 3,333 Total obligations.... 4,045 4,004 3,354 1 "Budget plan" represents the distribution of new budget authority, including financing adjustments from prior years. "Obligations" reflect funds obligated from new budget authority and from unobligated funds brought forward from prior years. HEALTH, EDUCATION, AND WELFARE Obligations of the Department of Health, Education, and Welfare for research and development, including facilities, will increase by $197 million to a level of $1,459 million in 1971. Biomedical research and development will be significantly expanded in 1971 in areas where there are clues to the prevention or curing of diseases. A major increase will be made in efforts to understand the relationship of viruses to cancer and in studies of the correlation between heart disease and risk factors implicated in cardiovascular disease. Other health-related research to be emphasized includes population and family planning, drug abuse, and alcoholism, and infant and child health. Added impetus will be given in 1971 to developing the technology to control air pollution and to examining the health effects of environmental pollutants, food additives, and pesticides. Additional details about Federal biomedical programs may be found in Special Analysis K of this volume. SPECIAL ANALYSES 261 Educational research and development will stress the improvement of reading skills, early child development, and evaluation of the impact of educational programs. A prime component of these evaluation efforts will be expanded support of the national study of the educational attainment of the population being administered by the Education Commission of the States. An increase provided for the experimental schools program, initiated in 1970, will test, develop, and demonstrate comprehensive new approaches to increasing student achievement in actual school situations. ATOMIC ENEKGY COMMISSION Operating costs of the Atomic Energy Commission fof conduct of research and development will total $1,320 million, and obligations for related construction and equipment will total $240 million. The Commission's research program will continue in 1971 at approximately the same dollar level as in 1970. Funds will be redirected within the physical and biomedical research programs in 1971 to accommodate higher priority areas of research. One major particle accelerator for high energy physics research will be shut down and other elements of the physical research program reduced to permit an increase in research associated directly with construction of two major new accelerators, more effective use of other new facilities, and expansion in controlled thermonuclear research. The Commission's development programs include design and testing of nuclear weapons, development of improved reactors, and development of peaceful uses of radioisotopes and nuclear explosives. There will be an increase in 1971 in the reactor development program for development of improved nuclear propulsion plants for naval ships and for fabrication of the demonstration core for the Light Water Breeder Reactor civilian power program. These increases will be largely offset by decreases within the reactor development program. Funds are also included to enable AEC to participate with industry in a cooperative project to demonstrate the technology of the Liquid Metal Fast Breeder Reactor civilian power program. The Plowshare program, which seeks to develop peaceful applications of nuclear explosives, is being reduced and redirected in 1971 to shift program emphasis from excavation experiments to various underground engineering applications, principally the exploitation of marginal deposits of natural resources. The AEC's budget for 1971 provides for obligations of $65 million and expenditures of $68 million (compared with obligations of $70 million and expenditures of $35 million in 1970) for continued construction of the 200 Bev accelerator, located near Chicago. Also included in 1971 are expenditures for continuation of several major construction projects initiated in previous years and for procurement of capital equipment. 262 THE BUDGET FOR FISCAL YEAR 1971 Table Q-7. ATOMIC ENERGY COMMISSION—RESEARCH AND DEVELOPMENT (in millions of dollars) Program Conduct of research: Physical research Biomedical research Weapons research... Other programs 1969 actual 274 86 1970 estimate 1971 54 3 278 87 57 2 274 86 57 417 424 418 443 498 26 13 9 424 447 28 14 10 432 424 25 8 Total, conduct of development, expenditures 989 923 901 Research and development facilities expenditures. _ 248 276 320 1,654 1,623 1,640 ___ __ Total, conduct of research, expenditures Conduct of development: Reactor development _ Weapons development and testing-. Production of special nuclear materials Plowshare __ Other programs Total expenditures__1 1 12 NATIONAL SCIENCE FOUNDATION The total obligations of the National Science Foundation for research and development, including facilities, will increase from $317 million in 1970 to $384 million in 1971. This reflects a marked effort to give support to research in areas where new scientific understanding is needed to aid in the solution of pressing problems affecting mankind. Increased funds are planned for research—within and across disciplines—on the environment, including studies of atmospheric processes, oceanography and ecological systems, and on other problems of our society. Research to improve man's understanding and use of the seas and the coastal zone will be expanded under the National Sea Grant program and under the International Decade of Ocean Exploration for which the Foundation has been assigned lead agency funding responsibility. Funds are also included for the initiation of an Arctic Research program which will be principally directed to ecological studies of Alaska's North Slope. Funding for 1971 includes $3.8 million to modify the 1,000-foot radio astronomy antenna at the Arecibo Observatory in Puerto Rico which will substantially improve the scientific usefulness of the instrument. DEPARTMENT OF AGRICULTURE Obligations for the Department of Agriculture for research and development, including facilities, will increase from $294 million in 1970 to $306 million in 1971. Research on rural community development, to be conducted primarily by the State experiment stations, will increase in 1971 in SPECIAL ANALYSES 263 keeping with the administration's concern with the economic develment of rural America by local initiative supported by local institutions. Additional funding is also included for ongoing research programs at the State experiment stations and schools of forestry. Emphasis will also be given to research on reducing the cost of producing beef and milk, on methods for utilizing remote sensing data, on increasing timber production, in determining the comparative advantage of U.S. farm products in world trade and on reducing pollution from animal wastes. DEPARTMENT OF THE INTERIOR Obligations for the Department of the Interior for research, development, and related facilities will increase from $257 million in 1970 to $272 million in 1971. One of the primary areas of emphasis will be pollution control and prevention. This research will help attain the long-range goal of an adequate supply of water suitable in quality for recreational, agricultural, and other public uses. Efforts to develop low-cost processes for converting saline water to fresh water will be expanded. Funds are also included to initiate Federal participation in an ongoing joint private-public research program to reduce the costs of placing highvoltage transmission lines underground. Research to reduce fatalities and injuries and to improve health conditions in coal mines will be intensified, with emphasis on dust control, prevention of cave-ins, and rescue techniques. More research will be undertaken on technology for conversion of coal to fuel gas and synthetic petroleum in order to augment present reserves of energy resources. Research will also be intensified on magnetohydrodynamics (MHD), a promising technology involving direct conversion of coal to electricity with minimal air and water pollution. DEPARTMENT OF TRANSPORTATION Obligations of the Department of Transportation for research and development, including facilities, will increase from $204 million in 1970 to $226 million in 1971. The increase in the Office of the Secretary of $9 million will expand long-range research efforts to automate more fully the air traffic control system. The main emphasis is on new systems concepts and new technology. FAA obligations will be $72 million, about the same level as 1970. However, a much larger portion of 1971 funds will be directed toward development of the components of air traffic control system to meet the air traffic growth forecast for the post-1975 era. The Coast Guard will obligate $27 million in 1971, an increase of $10 million over 1970. The increase is mainly for the national ocean data buoy project to provide improved meteorological and oceanographic data from ocean areas. The Federal Highway Administration program will increase from $43 million in 1970 to $61 million in 1971. The increase reflects greater 264 THE BUDGET FOR FISCAL YEAR 1971 emphasis on motor vehicle and highway safety research to expand our knowledge of the causes of highway accidents, injuries, and deaths. The results of this research will aid in improving the crash resistance of vehicle structures, in minimizing highway accident deaths and injuries, and in improving driver ability to avoid accidents. The Federal Railroad Administration will obligate $23 million in 1971, the same level as 1970. The main thrust of the program will be on development and testing of an experimental high-speed tracked air cushion vehicle. Research and development in the Urban Mass Transportation Administration will amount to $20 million in 1971. The program will be directed toward solutions of problems in user and community acceptance; stimulating private investments in promising areas of technological innovation; and influencing institutional constraints which inhibit the development and application of new systems. DEPARTMENT OF COMMERCE The Department of Commerce will obligate $99 million for research and development and related facilities in 1971, an increase of $12 million over 1970. The Environmental Science Service Administration will increase research designed to improve the detection and tracking of violent storms and extend forecasting and data gathering programs. Additional effort will be devoted to satellite sensing devices, weather modification studies, and the automation of aeronautical charting production. The Maritime Administration will focus primarily on research to reduce the costs of constructing, operating, and maintaining the American Merchant Marine. GOVERNMENT-WIDE MARINE SCIENCE AND SPACE PROGRAMS MARINE SCIENCE Obligations for marine science, technology, and related activities will increase by approximately $24 million to a total of $540 million in 1971. The major thrust in the new and expanded programs in civilian agencies is directed toward observing, measuring, and understanding conditions and trends in the environment and man's impact upon it. Increases are provided in the National Science Foundation for the International Decade of Ocean Exploration, for the Ocean Sediment Coring program, for Arctic research, and for expanding the National Sea Grant program—particularly to support coastal zone research. Funds are provided in the Department of the Interior for the new coastal zone management grant program and for the initiation of a lake restoration program. Increases in the Department of Transportation will permit expansion of advanced development of ocean data buoys for monitoring weather and sea conditions. In the Department of Commerce, increases are provided in the Maritime Administration for beginning a long-term program for reducing ship operating costs— a part of the Administration's maritime program. 265 SPECIAL ANALYSES Within the Department of Defense, the Advanced Research Projects Agency will expand work on surface effects vehicles for use in the Arctic. Increases of $42 million in civilian marine programs are partially offset by reductions in Navy, chiefly in deep submergence development and charting and mapping programs. Table Q-8 FEDERAL MARINE SCIENCE, TECHNOLOGY AND RELATED ACTIVITIES * (in millions of dollars) Department or agency 1969 actual Defense 2 Interior _ National Science Foundation _. ._ _ Commerce __ _ Transpo rta tion Atomic Energy Commission Health, Education, and Welfare State. . _ _ Agency for International Development Smithsonian Institution National Aeronautics and Space Administration _ - Total obligations - _ 1970 estimate 1971 estimate 261 81 265 99 247 95 35 38 41 49 63 59 20 11 7 7 2 2 31 10 7 8 3 2 43 10 9 8 3 2 2 2 2 465 516 540 1 The definition of marine science and technology used in this table is considerably broader than research and development. Included are such diverse activities as mapping and charting, marine environmental observation and prediction, planning for and development of coastal areas for conservation and recreation, loans for promoting the expansion of fishing industries in developing countries, and contributions to international organizations engaged in ocean related activities. These figures are not strictly comparable to those shown for marine science and technology last year. 2 Excludes development of the Navy's surface effects ships program which will increase from $8 million in 1970 to $20 million in 1971. SPACE In 1971 budget authority and expenditures for total Federal space programs will decline, primarily as a result of the cancellation of the Air Force's Manned Orbiting Laboratory, completion of the expensive development phase of the Apollo lunar landing program and the planned suspension of Saturn V launch vehicle and spacecraft production. The operational meteorological, communications, and navigation satellite systems of the Departments of Commerce and Defense are included in the space piogram totals although they are not included in the totals for research and development. NASA programs are described in table Q-6 and on pages 825-831 of the Budget Appendix. Department of Defense funding supports satellite development, portions of missile development, and range operations. This includes communications, navigation, and nuclear detection satellite programs. Estimates for the Atomic Energy Commission reflect slight decreases related to the development of the NERVA nuclear rocket and space nuclear electric power sources for space applications. Funds for Interior and Agriculture support their participation in the Earth Resources Technology Satellite project. National Science Foundation space related activities are for research rockets and satellite and observation instruments. 266 THE BUDGET FOR FISCAL YEAR 119 71 Table Q-9. FEDERAL SPACE PROGRAMS (in nullions of dollars) Budget authority Department or agency 1969 actual National Aeronautics and Space Administration * Defense Atomic Energy Commission Commerce Interior National Science Foundation Agriculture Total 1 _ Expenditure! t 1970 estimate 1971 estimate 3.827 2,013 118 20 2 2 1 3.552 1,756 102 7 3 2 1 3.148 1.674 99 26 4 2 2 5.983 5.423 4.954 1969 actual 1970 estimate 1971 estimate 4,083 2,095 116 31 2 2 1 3,710 1,820 103 27 3 2 1 3.219 1,690 104 24 4 2 2 6.330 5.666 5.045 Excludes amounts f or aviation technology. HISTORICAL SUMMARY The table below gives historical data on total research and development expenditures by major agency. Table Q-10. EXPENDITURES FOR RESEARCH AND DEVELOPMENT,* 1954-71 (in millions of dollars) Fiscal year 1954 1955 1956 1957. 1958 1959___ 1960 1961 1962 1963 1964 1965-. 1966 1967___ 1968___ 1969 1970 estimate. 1971 estimate. Department of Defense * 2,487 2.630 2.639 3.371 3,664 4,183 5.654 6,618 6.812 6,849 7.517 6.728 6.735 7.680 8,164 7,858 7,714 7,782 NASA* 90 74 71 76 89 145 401 742 1.251 2.539 4.171 5.093 5.933 5.426 4.724 4.252 3.889 3.403 AEC 383 385 474 657 804 877 986 .111 .284 .336 .505 .520 .462 .467 .594 .654 .623 .640 D/HEW 63 70 86 144 180 253 324 374 512 632 793 738 879 1.075 1.283 1.221 1.323 1.377 1 Including research and development facilities. 2 Includes civil functions. ' National Advisory Committee for Aeronautics prior to 1958. NSF 4 9 15 31 34 54 64 83 113 153 203 206 241 277 315 342 342 347 Other 121 140 161 183 220 294 315 356 409 490 518 604 768 917 950 882 998 1.147 Total 3.148 3.308 3.446 4.462 4.991 5.806 7.744 9.284 10.381 11.999 14.707 14.889 16.018 16.842 17.030 16.208 15,889 15,696 PART 4 ANALYTIC PROGRAM STRUCTURE 267 INTRODUCTION Part 4, Special Analysis R> presents the budgets of a number of the larger agencies in terms of the program structure used for program evaluation and planning in each agency. The program structures do not always conform to the organizational structure or appropriation pattern of an agency. This presentation, therefore, provides a different perspective from the view presented in Part 5 of the Budget, and cannot be directly interrelated with those data. 268 SPECIAL ANALYSIS R SELECTED AGENCY BUDGETS BY PROGRAM CATEGORIES In this analysis Federal financial data are displayed in terms of the program structures of selected agencies for the three years covered by the budget. Program structures are developed to reflect the major objectives and outputs of agency expenditures and are intended for use primarily in program evaluation and planning. This is in contrast to appropriation structures, which reflect objects of expenditure, such as personnel pay and construction and are useful for the control function of budgeting. Twenty agencies are included in this analysis; they account for $201.3 billion, 93% of the recommended budget authority for 1971. Budget authority shown in this way reveals the relative magnitudes of effort being devoted to each objective as well as information on the changes in the level of effort over time. The tables, however, make no claim to show how efficiently or effectively various objectives are being achieved. Comments accompanying the tables are designed to draw attention to the most significant aspects of the tables, to give some additional explanation of the program objectives, and to interpret changes over time in the most significant program categories. Because the program structure is by agency and not governmentwide, caution should be used in making interagency comparisons. Similar wording in titles in two or more agencies may relate to different objectives. Also, the classification may or may not conform either to the organizational or appropriation structures of an agency. In several cases, the amounts shown by program category and subcategory are derived by distribution of appropriation totals, and statistical allocations have been used where necessary to distribute appropriations to the agency program structure. Further subdivision of the program structure into program elements is available, but was not included because of the length and detail of the agency program structure. Improvements are being made in agency program structures. These changes offer prospects for better identification of major agency objectives, greater flexibility in displaying program data by multiple objectives, elimination of unnecessary detail or fragmentation of operating program data, and further development of a governmentwide program structure into which agency structures could fit. In addition, efforts are being directed toward relating financial data to pertinent output, benefit, beneficiary, and social impact data. These efforts should add to the usefulness of program structures in program planning and policy analysis in the years ahead. DEPARTMENT OF AGRICULTURE The program structure consists of 15 categories and comprehensively reflects the major objectives of the Department of Agriculture. 269 270 THE BUDGET FOR FISCAL YEAR 1971 These objectives can be conveniently grouped into seven departmental goals: (1) enhance farm incomes, (2) improve agricultural production and marketing, (3) expand exports of agricultural commodities, (4) reduce and eventually eliminate hunger and malnutrition, (5) assure the wholesomeness of meat and poultry and protect the public from harmful pesticides and other hazards, (6) enhance rural development, and (7) manage public timber resources effectively. Major changes in program levels for 1971 include: a rapid expansion in Food and nutrition to implement the President's new Food Stamp program and extend food assistance to needy families in all areas of the country on a full-year basis; nearly doubling the housing loan program through insured and guaranteed loans to help meet the rural share of the national housing goals; selective increases in programs to promote the economic and social development of rural areas, placing greater reliance on States and local community leadership; and reductions in programs contributing to excess agricultural production capacity. Table R - l . PROGRAM D I S T R I B U T I O N OF BUDGET A U T H O R I T Y DEPARTMENT O F A G R I C U L T U R E (in millions of dollars) 1969 actual 1970 estimate 1971 estimate Farm income Agricultural production capacity Agricultural marketing and distribution system Food for peace Export market development Foreign agricultural development Food and nutrition Health and safety Youth development and family living Community development services Housing l Public facility and business expansion Resource protection and environmental improvement. Recreation, wildlife, and natural beauty Timber General administration Program support 6,176 595 133 301 35 4 1,039 111 40 28 135 413 225 71 341 5 40 4,673 620 145 921 70 4 1,516 132 42 31 42 445 240 • 61 368 5 45 4,184 407 144 933 65 1 4 2,089 144 45 53 56 403 225 60 312 6 50 Total distributed to programs aboveDeduction for offsetting receipts 9,691 -516 9,361 -564 9,181 -604 9,176 8,797 8,577 Total budget authority, Department of Agriculture. 1 Budget authority does not reflect program level. DEPARTMENT OF COMMERCE The Department of Commerce engages in a wide range of activities, which are directed toward assisting the economic development of the country. The reduction in budget authority for Periodic data production results from the completion in 1970 of major elements of data collection for the decennial census. Activity will increase in 1971 on other smaller periodic censuses. 271 SPECIAL ANALYSES Within the Economic development assistance category, the decrease in Other area assistance from 1970 to 1971 is more than offset by the increase in District programs. This reflects the double effect of the continued increase in the number of development districts and the policy of giving preference to projects within districts as opposed to isolated redevelopment areas. I h e Promotion of industry and commerce category is primarily aimed at improving the U.S. balance of trade. Eighty-one percent of the increase in budget authority for the category will be used for this objective. Increases for Environmental science services are primarily for improvements in forecasts and warnings of natural disasters such as floods, hurricanes, tornadoes, and severe storms. Approximately 45% of the increase in budget authority is for restoration of financing of the operation of weather satellites that were financed in 1970 by prior year appropriations. Promotion of the merchant marine reflects the Administration's new program to modernize the U.S. Merchant Marine fleet, to make it more competitive in world trade, to decrease fleet operating subsidies, and to reduce the fleet's dependence on public construction subsidies in future years. Table R-2. PROGRAM DISTRIBUTION OF BUDGET AUTHORITY DEPARTMENT OF COMMERCE (in millions of dollars) Program category and subcategory General purpose data production and economic analysis: Current data production programs Periodic data production programs Statistical services Construction and analysis of national economic accounts _ Category total Economic development assistance: Regional programs District programs Urban programs Other area assistance Indian programs Special problem area programs Research General administration Category total. Promotion of industry and commerce: Business assistance International business development Export control Field program operations Foreign direct investment regulation Promotion of travel to the United States._ Promotion of minority business enterprise. Category total 1969 actual 1970 estimate 1971 estimate 18.1 24.4 19.6 159.5 22.7 55.2 3.9 3.1 3.6 3.4 3.1 4.1 49.5 186.2 85.0 26.9 84.1 31.2 81.4 20.0 16.0 3.0 19.6 31.0 79.3 21.5 88.2 27.5 9.5 2.2 20.6 56.9 114.8 30.0 66.2 27.4 282.1 279.8 319.9 6.3 16.8 5.5 5.1 3.7 4.5 6.9 21.7 5.8 5.7 3.1 4.5 1.2 7.8 27.2 5.9 6.3 3.0 6.5 1.6 41.8 48.9 58.3 3.0 21.6 272 THE BUDGET FOR FISCAL YEAR 1971 Table R-2. PROGRAM DISTRIBUTION OF BUDGET AUTHORITY DEPARTMENT OF COMMERCE (in millions of dollars)—Continued I Program category and subcategory Environmental science services: Weather forecasts and warnings River andfloodforecasts and warnings Earth description, mapping, and charting Marine description, mapping, and charting Telecommunications and space services Environmental satellite Retired pay, commissioned officers 95.6 4.1 14.1 Category total Physical measurements and standards: Basic measurements and standards Materials measurements and standards Technological measurements and standards Category total Technological development and utilization: Grant and issuance of patents and registration of trademarks. State technical service Transfer of technology _ Category total _. Promotion of the merchant marine: Fleet development Fleet operation _ _ _ Category total 1969 actual _ 1970 estimate 1971 estimate 120.3 6.8 17.3 22.4 6.6 22.7 1.2 104.5 4.2 15.0 27.2 6.4 10.0 1.2 166.7 168.5 208.4 13.2 17.3 6.1 12.7 19.0 6.6 15.7 20.4 8.6 36.6 38.3 44.7 42.5 5.3 3.9 47.6 .3 4.5 51.1 51.7 52.4 55.9 123.9 213.9 28.0 236.1 221.5 198.9 337.8 264.1 27.3 6.6 28.8 1.4 General administration Total distributed to programs above Deductions for offsetting receipts Intergovernmental transactions_ _ _ Total budget authority, Department of Commerce 1,169.6 DEPARTMENT OF DEFENSE—MILITARY The military programs of the Department of Defense provide for the security of the United States and protect its vital interests abroad. These programs have been subjected to the most comprehensive reexammation ever taken. Because not all of the activities planned when this Administration took office are now required, the defense needs of the United States can safely be met in 1971 within lower budget levels. The Strategic forces must at all times constitute a deterrent against an evolving nuclear threat. To accomplish this will require budget 273 SPECIAL ANALYSES authority of about $7.7 billion in 1971, compared with $7.1 billion in 1970 and $8.2 billion in 1969. The General purpose forces must be substantial to cope with a wide range of contingencies other than general nuclear war. At the same time U.S. allies should be expected to carry the principal burden for their internal defense. In accord with these considerations, the general purpose forces will require the largest share of the military budget in 1971. It is, however, a declining share. This decline, which also reflects falling manpower levels, can be seen in the budget requirements of the other defense programs which support the strategic and general purpose forces. The Research and development program provides for the aggressive, but prudent and selective effort, to ensure that our forces in the future will be equipped to meet effectively an evolving threat. Table R-3. PROGRAM DISTRIBUTION OF BUDGET AUTHORITY DEPARTMENT OF DEFENSE—MILITARY (in millions of dollars) Program category 1969 1970 1971 Strategic forces General purpose forces Intelligence and communications Airlift and sealift Guard and Reserve forces Research and development Central supply and maintenance Training, medical, and other general personnel activities (Retired pay included in category above) Administration and associated activities Support to other nations 8, 174.0 29, 131.9 5, 585.3 1, 497.2 2, 125.5 4, 594.6 9, 311.8 12, 369.3 (2, 450.0) 1, 307.5 2, 040.8 7.091.5 7,712.8 26.418.1 24,023.5 5,313.0 5,115.3 1,597.9 1,428.6 2,498.0 2,465.4 4,767.5 5,396.2 8,358.4 9,283.0 12,913.2 12,550.1 (2,859.0) (3,194.0) 1,485.5 1,462.9 2,419.4 2,273.1 Total distributed to programs above Undistributed nonprogram financing adjustments 76,137.9 832.5 73,618.2 -134.5 70,955.2 -157.6 76,970.4 73.483.8 70,797.6 Total budget authority, Department of Defense. DEPARTMENT OF DEFENSE CIVIL: ARMY CORPS OF ENGINEERS The civil works program of the Army Corps of Engineers provides for the planning and development of water and relatea land resources in each of the Nation's 19 major regions. These regions, together with the General support category, as set forth below, provide the focus for management of the civil works program. The long-range objective of the Corps in project planning is to relate projects to the needs of the people of each river basin or region as defined in the Water Resources Council's comprehensive planning program and national assessment. Flood control continues to require the largest proportion of funds, followed by multiple purpose power facilities and navigational facilities during 1969-71. For allocation of funds in these terms, see Special Analysis P, Federal Public Works Activities. 274 THE BUDGET FOR FISCAL YEAR U971 Table R-4. PROGRAM DISTRIBUTION OF BUDGET AUTHORITY DEPARTMENT OF DEFENSE—CIVIL: ARMY CORPS OF ENGINEERS (in millions of dollars) 1969 actual New England region __ Middle Atlantic region Gulf and South Atlantic region Ohio region Great Lakes region Upper Mississippi region Souris-Red-Rainy region Missouri River region Arkansas-White-Red region Lower Mississippi region _ Rio Grande region Texas Gulf region Colorado region Great Basin region California region. _ Columbia-North Pacific region Alaska region Hawaiian Islands region Puerto Rico and Virgin Islands region. General support Total distributed to programs above... 1969 reserve (Public Law 9 0 - 3 6 4 ) . . . - . . 1970 budgetary reserve to be applied in 1971 _ Offsetting proprietary receipts Total budget authority, Army Corps of Engineers, Civil. _ 1 1970 estimate 1971 estimate 19.5 59.4 94.6 149.7 37.7 76.3 .9 88.0 167.4 117.5 9.1 43.1 1.7 .1 51.6 215.6 6.2 .8 .5 62.1 18.7 66.7 98.6 147.1 38.1 60.4 1.1 72.7 141.2 123.0 5.4 40.5 2.5 .4 48.0 166.5 1,201.8 43.8 1,362.5 -8.3 1,106.Q -43.8 192.4 -7.3 1,237.3 1,147.3 1,262.6 6.8 .8 .1 67.4 28.8 95.9 122.3 188.1 44.7 80.0 1.4 94.5 123.8 141.9 11.7 58.4 5.5 .8 79.0 222.7 14.7 1.6 .3 46.4 1-92.4 -7.5 Exclusive of budgetary reserve for contract-deferral program. DEPARTMENT OF HEALTH, EDUCATION, AND WELFARE The broad objectives of the Department are reflected by four program categories: Education, Health, Social and rehabilitation services, and Income security and their associated subcategories. Budget authority requests for educational programs increase $337 million over 1970 with special emphasis in all subcategories on experimentation with new techniques. The Health subcategories reflect the rapid rise in health-related costs, especially Provision of health services; emphasis on increasing the supply of health manpower; and the concern for improving the organization and delivery of health services. The subcategories under Social and rehabilitation services reflect the emphasis on improving individual capability for selfsupport through various public assistance programs primarily administered by State and local governments. Income security is primarily provided through social insurance and public assistance programs. Increases in Other individual and family support include 275 SPECIAL ANALYSES growth in the Aid to Families with Dependent Children program and $500 million in 1971 for the initiation of the Family Assistance Program. Increasing knowledge provides funds for program experimentation to assure improved performance in the future. (See also Special Analyses I, K, and L.) Table R-5. PROGRAM DISTRIBUTION OF BUDGET AUTHORITY DEPARTMENT OF HEALTH, EDUCATION, AND WELFARE (in millions of dollars) Program category and subcategory 1969 actual Education: Development of basic skills __. Development of vocational and occupational skills. Development of academic and professional skills... Library and community development _ General research (nonallocable research) General support __. Category total. Health: Development of health resources Prevention and control of health problems. Provision of health services General support Category totalSocial and rehabilitation services: Improving individual capability for self-support Improving the social functioning of individuals and families.. General development of social and rehabilitation resources... General support _ Category totalIncome security: Aged assistance Disability assistance Other individual and family support Increasing knowledge General support _ _. Category total Executive direction and management (Office of the Secretary).. Total distributed to programs above Net deductions for interfund transactions and receipts from the public not distributed above _ Total budget authority, Department of Health, Education, and Welfare 1970 estimate 1971 estimate 2,347.6 276.8 874.7 85.0 39.5 42.9 1,963.1 309.7 892.3 46.8 33.5 47.3 2,243.5 398.7 871.5 30.5 35.9 49.9 3,666.6 3,292.7 3,629.9 2,107.7 461.2 9,753.5 67.4 2,060.5 480.0 10,571.8 63.4 2,127.0 499.0 13,251.8 70.5 12,389.8 13,175.8 15,948.3 586.0 297.1 109.8 91.2 754.4 415.8 108.2 132.3 877.7 412.1 123.3 140.2 1,084.1 1,410.7 1.553.3 28,238.5 4,144.8 1,890.8 32,609.9 4,889.1 2,400.3 34,628.5 5,707.2 3,413.9 .8 8.7 9.6 322.3 361.3 451.6 34,597.1 40,269.3 44,210.8 26.0 38.5 45.0 51,763.6 58,187.0 65,387.4 -526.5 -550.3 -584.0 51,237.1 57,636.7 64.803.4 276 THE BUDGET FOR FISCAL YEAR 1971 DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT The fundamental objective of the Department's programs is to assist in the realization of a "decent home and a suitable living environment for every American family, thus contributing to the development and redevelopment of communities.'' This objective is evident in the major categories. The first category relates specifically to housing and mortgage markets. The next four categories contain programs which help to improve the general urban environment by assisting State and local governments with the costs of public facilities, urban redevelopment, and management of community development activities. In 1971, budget authority for the Department's housing programs will total nearly $1 billion. In addition, several housing programs improve the efficiency of mortgage markets (e.g., guarantee of mortgage-backed securities and insurance of home loans) usually without requiring budget authority. Even in the case of programs which do require budget authority—mainly those which help to provide housing for low- and moderate-income families—a comparison of the 1970 and the 1971 figures is misleading because the 1970 totals include nonrecurring authority to purchase mortgages, which the Department will use in ways that do not result in large budget outlays. Budget authority requested for programs in the four categories designed to improve the general urban environment is about $2 billion for 1971. Urban Renewal and Model Cities account for $1.6 billion. There are selected increases in other community development programs. The Department's research and demonstration in urban technology will grow to $55 million in 1971—more than double the 1970 level. This will support Operation Breakthrough: an effort to assure the ability of the homebuilding industry to meet future housing needs. Other research and technology projects are designed to improve the process of urban development. Table R-6. PROGRAM DISTRIBUTION OF BUDGET AUTHORITY DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT (in millions of dollars) Program category and subcategory Assuring decent housing for all Americans: Assuring an adequate supply of low- and moderate-income housing... Promoting the efficient functioning of private housing markets.. 1969 actual 1970 1971 1,293.2 1.5 2,642.1 2.4 923.2 6.1 1,294.7 2,644.5 929.3 Assuring adequate and efficient local public and private facilities and services 203.2 180.8 193.2 Improving the physical environment of urban communities (urban renewal) 1,047.8 1,077.5 1,085.0 Category total 277 SPECIAL ANALYSES Table R-6. PROGRAM DISTRIBUTION OF BUDGET AUTHORITY DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT—(Continued) (in millions of dollar,) Program category and subcategory Improving the social environment of urban communities: Model cities and governmental relations Fair housing and equal opportunity 1969 actual __ Category total Improving management of community development activities: Improving governmental planning and executive management of community development Additional education and training for efficient urban development and management Category total _ __ Improving management of departmental programs and resources: Research and demonstrations in urban technology Provide executive direction and general support __ Liquidate assets of terminated and other programs Category total__ Adjustments to budget authority, net Total budget authority, Department of Housing and Urban Development _ 1970 estimate 1971 estimate 312.5 2.0 575.0 6.3 575.0 11.3 314.5 581.3 586.3 43.8 50.0 60.0 3.5 3.5 3.5 47.3 53.5 63.5 18.2 59.1 40.1 23.0 76.9 55.0 84.8 117.5 99.9 139.8 -11.8 2.0 .2 3,013.2 4,639.6 2,997.3 DEPARTMENT OF THE INTERIOR The Department of the Interior is concerned with the management* conservation, and development of the Nation's water, energy, minerals, timber, forage, fish, wildlife, and outdoor recreation resources. It also has major responsibilities for Indian and territorial affairs. Implicit in many of the Department of the Interior's activities is an overall concern for the quality of the environment, which is reflected in a number of program categories and subcategories. The largest single environmental program is water pollution control, which is included in the Management and supply subcategory of Water and power. This category reflects the initiation of the 5-year $4 billion water pollution control program for constructing of waste treatment plants. It also includes grants to States to improve waterquality management. Water data and support functions includes training for waste treatment plant operators; support for higher education in engineering, biology, and related fields; basinwide and regional planning; and maintenance of the Nation's basic water data network. Research includes projects dealing with water quality, subsurface waste storage, conversion of salt water to fresh water, weather modification, underground power transmission, demonstration of waste treatment facilities, and basic research on hydrologic phenomena. The subcategories under Minerals represent various objectives including enhancing the usefulness of our mineral resources through 278 THE BUDGET FOR FISCAL YEAR H971 research, efficient management of mineral resources on Federal lands and improvement in Mining health and safety, which rises significantly in fiscal year 1971 as a result of the passage of Federal Coal Mine Health and Safety Act of 1969. The Land, forage, timber category includes research in geology, earthquakes and volcanic phenomena; and fire protection and land restoration programs. Transportation funds are used for road building associated with Timber production. Funds for Fire protection in 1969-71 reflect the uncertainties of fire occurrence. The Recreation use and preservation category reflects large increases in fiscal year 1971 for land acquisition, an essential step in park development. In addition, the program structure reveals the rough distribution of effort among Land acquisition under the Land and Water Conservation fund, construction of facilities, and operation, and gives some indication of the rising commitment for Federal park and recreational areas. The program structure for the Indians category reveals the wide variety of objectives supported by Bureau of Indian Affairs programs and the especial importance of Elementary and secondary education programs. Reservation development shows a decrease in 1971 because of the financing of Indian roads from prior-year balances. Budget authority in 1970 and 1971 for the Trust Territory contains increases for expanded education, health and economic development programs. Table R-7. PROGRAM DISTRIBUTION OF BUDGET AUTHORITY DEPARTMENT OF THE INTERIOR (in millions of dollars) Program category and subcategory Water and power: Water data and support functions Research Management and supply Recreation development and construction Transmission and distribution of power Operation and maintenance Emergency funds not subject to advance allocation General support _ Category total. Minerals: Information, support and regulatory functions Classification, leasing, and sale Geologic sources Primary nonfuel minerals supply Liquid fuel __. Gaseous fuels— Solid fuels Nonenergy uses of fuels Mining health and safety Special programs Environmental protection General support _ _. Category total.. 1971 estimate 42.1 87.8 107.5 123.3 46.3 105.8 4,217.6 10.6 106.4 80.6 84.5 1.0 1.0 25.6 10.9 24.9 279 SPECIAL ANALYSES Table R-7. PROGRAM DISTRIBUTION OF BUDGET AUTHORITY DEPARTMENT OF THE INTERIOR (in million* of dollars)—Continued Program category and subcategory Land, forage, timber: Land classification and disposition. Earth study and measurement Earth hazards Land utilization, protection, and restoration. Timber production ._ Livestock forage production _ _ Transportation system Fire protection 0 & C allocation to Forest Service General support__ Category total. Aquatic living commercial resources: Established fisheries __ Developing fisheries General research Services, facilities, and equipment.. General support Category totalRecreation use and preservation: Planning and assistance Land acquisition—LWCF — Land acquisition—Other Development and construction—adding new capacity Development and construction—supplementing existing capital Other road construction _. Management/operations/maintenance—new capacity Management/operations/maintenance—existing capital Resource protection—NPS Rare or endangered species Wildlife habitat and production—including migratory birds Fish habitat and production Indian fish and wildlife General support Category total. Indians: Preschool education _. Elementary and secondary education... Post-secondary education Educational research and development. School construction _ Reservation development Community services Repair and maintenance, B and U Claims and treaty obligations General support Tribal funds Category total. 1969 actual 8.0 42.2 1.6 11.6 9.5 8.8 16.9 17.5 1970 estimate 8.6 45.9 1.8 11.9 10.9 9.7 14.5 31.3 2.0 1971 estimate 9.1 49.6 1.9 12.0 11.7 9.8 13.1 5.1 6.9 2.5 5.2 123.1 141.8 121.7 22.6 2.5 7.1 20.5 2.9 8.4 14.6 3.6 17.2 4.4 15.7 2.7 8.3 15.5 4.7 50.4 53.5 46.9 13.3 15.8 112.8 11.3 60.8 23.0 294.3 12.9 7.9 12.2 1.3 1.3 1.9 102.7 2.3 1.3 2.1 4.9 189.9 13.6 28.3 2.8 1.8 13.0 41.6 .9 80.9 2.8 1.1 97.5 3.3 62.3 26.2 69.4 29.9 1.1 5.5 1.7 6.2 72.6 31.4 1.6 6.3 430.6 436.4 601.1 3.5 7.3 116.8 8.7 .6 .9 89.8 5.1 106.7 6.3 .3 9.1 55.4 16.6 .2 14.9 79.0 79.6 19.1 .2 12.7 106.0 14.2 101.6 19.6 .2 13.1 70.1 376.5 425.2 383.2 15.6 74.2 48,9 88.8 280 THE BUDGET FOR FISCAL YEAR 1071 Table R-7. PROGRAM DISTRIBUTION OF BUDGET AUTHORITY DEPARTMENT OF THE INTERIOR (in millions of dollars)—Continued 1969 actual Territories: Trust Territory American Samoa Guam __ Virgin Islands Office of Territories 1970 estimate 1971 estimate __ 30.0 7.6 6.1 13.2 .4 48.1 7.2 7.5 11.5 .4 60.0 8.2 8.3 12.5 .5 __ 57.3 74.7 89.6 Other programs: Payments to Treasury, States, and subdivisions Secretarial direction and administrative support (solicitor). Secretarial direction and administrative support (secretary) _ 83.8 5.6 S.7 93.7 6.7 10.9 98.1 7.3 12.0 98.1 111.3 117.4 2,050.8 -1,043.4 -40.3 2,882.4 -962.3 -31.4 6,147.6 -1,638.1 967.2 1,888.6 4,509.5 __ _ Category total Category t o t a l Total distributed to programs above (Federal and trust funds) Offsetting proprietary receipts Intragovernmental transactions - Total budget authority, Department of the Interior DEPARTMENT OF JUSTICE The Department of Justice is charged with the enforcement of Federal laws, the rehabilitation of Federal offenders, the control of immigration and naturalization, and the general legal representation of the Federal Government. In the past 3 jrears, it has also assumed the important task of providing financial aid to State and local law enforcement agencies. The program structure shows the allocation of the Department's budget in terms of its major objectives. These allocations show the emphasis being placed upon the Administration's fight against crime and narcotics, and its concern with effective enforcement of civil rights laws. Improvement of State and local law enforcement operations shows a major program increase of $188.7 million in 1971. Funds for control of narcotics and dangerous drug abuse increase by about 30% over the 1970 level and are nearly double the 1969 level. Additional funds for Correction of Federal offenders reflect the Administration's commitment to improve the Federal prison system. Budget authority for civil rights and community relations activities increases so that the 1971 level is nearly 150% of the 1969 level. This reflects the Administration's strong commitment in this area. Consumer protection has been made a separate category in this table to emphasize the importance the Administration attaches to this developing area of the Department's activities. (Special Analysis M in Part 2 of this volume reviews the Federal programs for the reduction of crime.) 281 SPECIAL ANALYSES Table R-8. PROGRAM DISTRIBUTION OF BUDGET AUTHORITY DEPARTMENT OF JUSTICE (in millions of dollars) 1969 actual Reduction in crime: Organized crime Interstate crime— Federal crime Crime prevention _ _ __ . Category total __ _ _ _ Law enforcement assistance: Improvement of State and local law enforcement planning Improvement of State and local law enforcement operations Research and development of devices, systems, and procedures. Support to law enforcement personnel for education and training... _ _. _ Development of information and statistical programs. Program support Category total Correction of Federal offenders: Custody and physical security of offenders . Inmate care, maintenance and operation of institutions Rehabilitation of offenders.. . Assistance to non-Federal correctional systems Research Program support Category total ___ Control of narcotics and dangerous drug abuse: Law enforcement Treatment of narcotics and dangerous drug offenders State and local assistance Drug abuse prevention Program support __ Category total.__ Internal security and governmental integrity: Integrity of Government personnel. . _ _ Security of Government, Government programs, and Government property _ _ Security of Government international affairs Identification, exposure, and control of subversive movements. Program support Category total Civil rights and community relations: Equal employment opportunity Housing _ Public education _ Interference with civil rights Voting Federally assisted programs Public accommodations and facilities Community relations assistance Category total 390-700 O—70 18 _ _ . 1970 estimate 1971 estimate 18.2 48.0 74.4 1.5 23.2 58.9 80.9 1.8 25.2 59.6 82.3 1.9 142.1 164.8 169.0 19.0 53.1 3.0 21.0 244.5 7.5 26.0 433.2 19.0 8.8 2.2 20.5 1.0 4.1 25.4 4.0 6.0 86.1 298.6 513.6 18.7 34.3 15.4 .1 .4 .8 21.6 50.3 18.8 .3 .5 .9 27.7 68.0 25.3 .8 .7 1.1 69.7 92.4 123.6 17.2 1.0 .2 1.2 2.1 24.2 1.8 .9 1.9 2.7 30.9 3.1 1.0 2.1 3.7 21.7 31.5 40.8 26.4 26.6 26.9 .9 .3 24.8 .1 1.0 .4 28.8 .1 1.1 .5 29.1 .1 52.5 56.9 57.7 1.0 .6 .9 16.3 1.6 .9 1.3 19.2 1.8 1.1 21.8 . 7/ Q 1 0 .3 .5 3.3 .3 .5 5.0 28.0 33.0 .3 .4 2.3 22.5 1.5 282 THE BUDGET FOR FISCAL YEAR 1>971 Table R-8. PROGRAM DISTRIBUTION OF BUDGET AUTHORITY DEPARTMENT OF JUSTICE (in millions of dollars)—Continued Program category and subcategory Competition in the American economy: Anticompetitive conduct Anticompetitive market structures Governmental intervention and influence Category total Legal representation of and advice to Federal officers and agencies: Integrity of the revenue system Defense of monetary claims Recovery of money owed the United States Integrity of administrative action __ Land acquisition _ _ Protection and development of natural resources _ Category totalSupport of the Federal judicial system: Facilitation of litigation . Protection of the integrity of the judicial systemCategory total _ Immigration and naturalization: Control of persons entering the United StatesControl of aliens in the United States Naturalization Central information record Program support Category totalGeneral support: Executive direction Personnel. _ _ ---Management support information. Administrative services _ Category totalConsumer protection Deductions for offsetting receipts _ Total budget authority, Department of Justice. 1969 1970 1971 .9 4.6 4.6 1.1 4.9 4.9 1.2 8.7 10.3 11.0 6.9 6.6 5.2 4.8 3.1 1.3 8.0 7.9 6.1 5.4 3.5 1.6 8.2 8.0 6.4 5.8 3.6 1.7 27.9 32.5 33.7 15.0 2.2 19.4 2.6 20.2 2.7 17.2 22.0 22.9 46.9 27.4 4.8 7.3 4.8 54.5 5.4 8.3 5.5 59.2 33.5 5.9 9.2 5.9 91.2 104.9 113.7 1.9 .4 .7 3.1 2.4 .6 1.0 3.4 2.5 .7 1.4 3.9 6.1 7.4 8.5 -1.7 .5 -1.7 1.3 -1.7 543.8 847.9 1,127.1 4.2 3.6 31.2 DEPARTMENT OF LABOR The Department of Labor's primary mission is to improve the working and living conditions of the Nation's work force. The principal means through which this mission is pursued, as reflected in the Department's program structure, are: (a) Manpower development and employment assistance, to help workers prepare for and obtain employment; (b) provision of Income maintenance to workers injured at work or involuntarily unemployed; (c) Wage and labor standards programs to achieve improved wages, safety, and general working SPECIAL 283 ANALYSES conditions of workers; (d) measures to improve relations between organized labor and management; (e) collection and analysis of basic data on employment and working conditions of workers; and (f) management support for the above activities. The largest of these areas is Income maintenance, largely in the unemployment insurance program, which provides income to workers involuntarily unemployed. In recent years a major thrust of the Department has centered on Manpower development and employment assistance, which has grown rapidly. Within this category On-the-job and Institutional training loom large, reflecting the emphasis on providing services to the disadvantaged who experience difficulty in obtaining suitable employment. Table R-9. P R O G R A M D I S T R I B U T I O N OF B U D G E T A U T H O R I T Y D E P A R T M E N T O F LABOR (in millions of dollars) Program category and subcategory 1969 actual Manpower development and employment assistance: On-the-job training Institutional training Work experience Special targeted training Employment assistance Research, development, and evaluation Program services 1970 estimate 1971 estimate 350.0 226.1 31.4 309.0 23.2 86.4 284.6 206.1 26.4 49.6 350.5 23.6 123.8 772.0 1,064.6 1,194.7 69.0 149.2 3,221.9 322.7 60.5 135.0 3,228.3 320.0 110.2 199.5 3,203.8 351.9 3,762.8 3,743.8 3,865.4 Wage and labor standards _ Labor management relations Data collection, analysis, and dissemination. General support _ 32.1 9.0 22.0 14.4 35.1 13.1 24.2 16.2 38.6 17.2 27.7 18.7 Total distributed to programs above. Proposed for separate transmittal 4,612.3 4,897.0 50.3 5,162.3 663.5 4,612.3 4,947.3 5,825.8 102.9 206.1 13.0 Category total. Income maintenance: Workers compensation (Federal) Unemployment insurance (Federal) _ Unemployment insurance (State).__ Administration Category total. Total budget authority, Department of Labor. 76.0 379.7 25.1 137.8 POST OFFICE DEPAKTMENT The eight categories of the Post Office Department's program structure describe both the basic postal service function of acceptance, processing, transportation, and delivery of the mail, and necessary support activities. Between 1970 and 1971 the estimated increases in funding for Direct services to mailers, Processing of mail, and Delivery services are all under 1.5%, reflecting some productivity increases and an approximate 2.4% growth in mail volume. The funding of support activities 284 THE BUDGET FOR FISCAL YEAR 1'971 is growing faster than the growth in mail-volume: approximately 5% for Administrative postal support, 9% for Enforcing postal laws and regulations, 31% for Research, development, and engineering, and 68% for Capital investment within the Logistical postal support category. It is this increased investment in new facilities and mechanized mail processing equipment plus improvement in management techniques, and Research, development, and engineering, which, over time, should achieve slower cost growth in the basic operating functions. Table R-10. PROGRAM DISTRIBUTION OF BUDGET AUTHORITY POST OFFICE DEPARTMENT (in millions of dollars) Program category and subcategory Direct services to mailers: Combined postal services at small post offices _ Window and vending services Collection service Category total. Processing of mail: Combined mail processing at medium-size post offices _ Platform operations Mail preparation Mail distribution Category total. Delivery services: Government vehicle service mail transportation. Preparation of mail for delivery City delivery Special delivery Rural delivery Category total. Transportation: Intercity transportation International transportation.. 1969 actual 1970 estimate 765.4 1971 estimate 713.1 224.0 63.4 242.6 66.7 775.4 246.2 67.5 1,000.5 1,074.8 1,089.1 378.4 244.1 1,241.3 408.6 265.6 79.6 ,333.0 414.8 271.0 75.8 1,344.2 1,940.4 2,086.9 2,105.8 62.8 67.9 624.0 1,209.2 69.7 636.8 76.5 579.2 ,131.1 61.6 400.1 62.2 417.2 1,222.7 64.3 422.0 2,234.8 2,380.4 2,415.5 520.4 48.8 46.0 543.4 51.6 45.8 559.0 56.7 45.4 615.2 640.7 661.0 15.8 12.2 20.2 13.7 23.1 14.2 28.0 33.9 37.3 2.8 16.2 4.6 10.0 27.0 10.8 12.3 34.7 15.8 23.6 47.8 62.8 Other transportation servicesCategory total Enforcing postal laws and regulations: Postal crimes and prohibited mailings _ Administrative compliance Category total. Research, development, and engineering: General research Applied research and development Engineering Category total. 285 SPECIAL ANALYSES Table R-10. PROGRAM DISTRIBUTION OF BUDGET AUTHORITY POST OFFICE DEPARTMENT (in millions of dollars)—Continued Program category and subcategory Administrative postal support: Departmental administration Regional administration Post office administration Category total.__ 1969 - _._ Logistical postal support: Capital investment- _ Expense — Category total Total obligations Net postal revenues Net unobligated budget authority Total budget authority, Post Office Department 1970 1971 stimate 32.4 66.1 445.3 47.2 79.4 503.3 55.4 87.3 516.7 543.7 629.9 659.4 245.7 596.1 352.5 683.1 590.8 740.6 841.8 1.035.5 1,331.5 7,228.1 -6,114.4 95.5 7,930.0 -6,525.3 33.0 8,362.5 -7,695.0 -84.2 1,209.2 1,437.7 583.3 DEPARTMENT OF TRANSPORTATION The basic objective of the Department of Transportation is to promote greater comfort, safety, speed, efficiency, and reliability in all modes of transportation. In addition, the Department supports science objectives, for example, by providing ice-breaking services for scientific exploration of the polar regions. The program structure below was developed with these objectives in mind. Expenditures on one mode of transportation often affect other modes as well; for example, a new urban highway may encourage users of mass transit to commute by driving, thus placing the suppliers of mass transit in financial straits and causing traffic congestion. Likewise, more fully reflecting the cost of air travel by imposing user fees may result in some air travelers switching to rail travel, such as in the Northeast Corridor between Washington and New York. The various modes of transportation must be viewed not in isolation but as interdependent parts of a system. Table R - l l below shows the increase in emphasis on Urban transportation. In addition, it shows that, while funds for Highways continue to exceed those for other individual modes, emphasis on urban mass transit and air transport is increasing relative to highways and water. This change in emphasis is being made in order to achieve a more balanced transportation system. The increase for Interurban Air transportation reflects the Administration's new program to increase the capacity of the air traffic control system; the increase for international air transportation reflects the new commitment to build a prototype supersonic transport. Both of these programs will, over time, pay for themselves—the former by aviation user charges and the latter by royalties from sales of supersonic transport aircraft. The program level for general transportation safety will increase slightly in 1971. The decrease in budget authority shown in the table results from the fact that highway safety grants will be financed from prior-year unobligated balances. 286 THE BUDGET FOR FISCAL YEAR 1971 Table R-ll. PROGRAM DISTRIBUTION OF BUDGET AUTHORITY DEPARTMENT OF TRANSPORTATION (in millions of dollars) Urban transportation: Highways Mass transit _ Category total (Trust funds) 1970 1971 2,337.4 168.5 2,338.6 176.6 2,338.2 3,100.0 2,505.9 2,515.2 5,438.2 (2,331.0) (2,331.0) (2,331.0) fnterurban transportation: Highways Rail Air Water Intermodal 3,053.8 17.4 828.8 66.8 2.4 3,058.2 15.4 1,121.3 74.1 2.1 3,054.8 26.2 1,346.9 69.7 2.0 4,271.1 4,499.6 3,969.1 (3,032.1) (3,032.1) (3,032.1) Category total __ (Trust funds) International transportation: Highways Air Water _ _ Category total General transportation safety and other national interests: National security, boundaries, and treaties Support of science General transportation safety Maritime pollution control Other highway programs Category total (Trust funds) General support: General research, development, and planning.. __ Administration Coast Guard retired pay Category total.._ (Trust funds) 1969 _ __ __ Total distributed to programs above Deductions for offsetting receipts Total budget authority. Department of Transportation 2.0 -30.0 44.6 85.0 44.6 20.0 290.0 39.0 16.6 129.6 349.0 176.1 65.8 131.1 1.9 99.0 190.3 66.7 151.6 6.3 103.0 179.2 123.2 80.9 6.8 99.0 474.0 (50.0) 517.9 (50.0) 489.1 (50.0) 96.0 298.1 53.0 101.3 332.6 59.7 113.6 351.9 64.5 447.2 (165.1) 493.5 (165.4) 530.1 (166.9) 7,412.7 -20.4 7,927.4 11,305.9 -25.3 -121.4 7,392.3 7,902.0 11,184.6 TREASURY DEPARTMENT The Treasury Department is responsible for the fiscal, debt management and monetary operations of the Federal Government. In addition, it has major responsibility for Federal policy affecting the U.S. balance of payments. The Treasury program structure deals with the operating elements of the Department, which are funded mainly through annual appropriations; however, Treasury also receives a substantial amount of reimbursements and other miscellaneous funds. 287 SPECIAL ANALYSES The Department's functions are grouped into program categories as shown in table R-12. Funds for the collection of revenues are increasing as a result of the rising number of tax returns audited and the increasing complexity of the returns filed. Not included in the program structure are interest on the public debt, which accounts for most of the budget authority for the Department, and several permanent appropriations. These are aggregated in the adjusting entry in the table. Table R-12. PROGRAM DISTRIBUTION OF BUDGET AUTHORITY TREASURY DEPARTMENT (in million* of dollars) Program category and subcategory Administration of Government finances: Public debt _ ~ _. Issuance, payment and servicing of Government checks. General activities.__ __ 1969 actual 1970 estimate 1971 estimate 59.5 44.0 4.8 65.7 45.1 5.2 67.5 46.2 5.5 108.3 115.9 119.2 150.4 66.3 83.0 26.9 259.7 31.3 34.7 17.6 79.4 65.1 169.7 75.0 99.9 26.7 279.0 30.9 39.2 22.1 95.3 74.1 180.1 79.8 101.5 33.5 300.5 32.1 40.5 23.1 814.3 911.9 972.4 Manufacture and distribution of coins, currency, and other financial instruments _ _ 15.1 19.3 19.7 Special law enforcement: Tax fraud investigations—racketeer segment. Alcohol and firearms investigations.. Other investigations Security responsibilities General activities 8.8 23.6 24.9 11.1 .9 23.0 29.9 37.4 16.3 1.9 23.9 31.8 42.8 26.8 6.2 69.3 108.5 131.6 7.9 9.8 9.7 1,015.0 1,165.4 1,252.6 Category total. Collection of revenue: Revenue accounting and processing Taxpayer assistance and services Delinquent accounts operation Delinquent returns operation. Audit of tax returns Tax fraud investigations—taxpayers in general Taxpayer appeals Alcohol and tobacco revenue and regulatory controls. Collection of customs duties General activities Category total. Category total Policy determination and related activities Total distributed to programs above Items not included in the program structure: Interest on the public debt Other appropriations not included in the program structure.. Deductions for offsetting receipts Intragovernmental transactions Total budget authority, Treasury Department. 101.0 80.3 18,800.0 19,000.0 362.4 439.0 326.2 -896.7 -1,208.4 -1,452.1 -84.1 -85.7 -88.5 16,588.2 16,944.2 19,111.8 19,077.1 288 THE BUDGET FOR FISCAL YEAR 1971 ATOMIC ENERGY COMMISSION The Atomic Energy Commission conducts a variety of production, research and development, and supporting activities to discharge its responsibilities for national defense and the peaceful applications of atomic energy. The major trends reflected in the following table include termination in 1971 of the procurement of uranium concentrates; an increase in production of enriched uranium for civilian powerplants; a decrease in plutonium production due to reduced requirements; completion of funding for a large nuclear weapons production facility; an increase in research and development on improved propulsion reactors for naval ships; continuation of the liquid metal fast breeder reactor program as a top priority program in the Development of central station nuclear power category; the shutdown of an accelerator under High-energy physics research to release resources for higher priority areas of basic research; and an increase in revenues. Table R-13. PROGRAM DISTRIBUTION OF BUDGET AUTHORITY ATOMIC ENERGY COMMISSION (in millions of dollars) Program category and subcategory 1969 actual Procurement and production of source and special nuclear materials: Procurement of uranium concentrates. _ Production of special nuclear materials Category total Military applications: Development and production of nuclear weapons Development of naval propulsion reactors Category total Development of space applications: Space propulsion __. Space electric power Category total . ___ ._ _ Development of central station nuclear power: Converter reactors ._ Advanced converter and low-gain breeder reactors. High-gain breeder reactors . . Desalting applications General research and development . _ - Category total. Development of other civilian applications: Merchant ship propulsion reactors Terrestrial electric power development Isotopes development Civilian applications of nuclear explosives Category total _ _ 1970 estimate 1971 estimate 101.5 363.9 51.0 363.8 18.2 397.8 465.5 414.8 416.0 1.066.9 131.7 1,029.1 135.1 954.6 148.8 1,198.6 1,164.2 1,103.4 57.7 48.8 53.3 39.8 47.0 37.0 106.5 93.1 84.0 15.4 33.6 102.3 2.2 2.8 14.6 25.6 176.9 1.4 2.8 12.9 32.1 101.1 1.0 2.5 156.3 221.3 149.7 4.4 8.1 13.7 1.4 3.8 6.8 15.0 2.4 6.8 8.8 26.2 27.0 18.0 289 SPECIAL ANALYSES Table R-13. PROGRAM DISTRIBUTION OF BUDGET AUTHORITY ATOMIC ENERGY COMMISSION (in millions of dollar*)—Continued Program category and subcategory 1969 actual Basic research: High-energy physics research Other physical research Biomedical research Category total Nuclear science and technology support: Supporting reactor development activities Training, education, and information. ___ Category total General support: Regulation Program direction and administration__ Community support Security investigations Cost of work for others Construction planning and design Category total Total distributed to programs above Revenues Other adjustments to budget authority, net Total budget authority, Atomic Energy Commission 1971 estimate 174.6 208.4 100.9 220.1 187.5 95.2 211.9 182.1 94.8 483.9 502.8 488.8 140.1 17.4 128.9 15.8 103.3 13.9 157.5 144.6 117.1 9.4 97.9 6.3 7.2 11.8 112.0 10.0 12.8 116.0 7.8 8.4 24.2 .9 8.5 42.9 3.0 142.8 188.2 169.3 2,737.1 -1.4 2,756.1 -186.3 -346.1 2,546.2 -228.0 44.8 2,615.8 2,223.7 2,363.0 21.1 _ 1970 estimate -119.9 GENERAL SERVICES ADMINISTRATION The General Services Administration provides Federal agencies with logistical support in the form of building space and supplies; data processing, transportation, communications, and records services; property and stockpile management, and other services in common demand. Direct public services are also provided in the operation of the National Archives and the Presidential libraries. The six major categories in the agency's program structure aggregate similar services, and help focus analysis on the extent of demand as well as on the economical supply of logistical support. Between 1970 and 1971, the budget authority requests reflect both general economies in operations governmentwide and specific economies in GSA's operations. The increase in the Facilities category will satisfy the most urgent requirements for building space. The lack of significant increase in Supply services and Agency direction and support services reflects emphasis on economy and restraint in program operations governmentwide. The decrease in Transportation and communications services results from elimination of motor transport management surveys except when agencies pay for them. The increase in Records services is necessitated by unpostponable preservation of irreplaceable historical documents. The increase in Other property management and disposal services represents additional costs in selling stockpiles no longer necessary to meet anticipated requirements. This additional 290 THE BUDGET FOR FISCAL YEAR 1971 investment of $2.4 million in this category will return to the Treasury an estimated additional $442.3 million in 1971, about $184 for each additional dollar of cost. Table R-14. PROGRAM DISTRIBUTION OF BUDGET AUTHORITY GENERAL SERVICES ADMINISTRATION (in millions of dollars) Program category and subcategory 1969 Facilities: Acquisition Management Service direction Category total Supply services: Provision of supplies Supply management Automated data management services Service direction Category totaL. Records services: Management Archival services Federal Register Service direction Category total __ Transportation and communications services: Transportation (other than motor equipment) Motor equipment __ Communications Public utilities Service direction Category total Other property management and disposal services: Property management _ Real property disposal __ _ Personal property disposal _ Program support Service direction Category total Agency direction and support services: Executive direction _ Allowances and services to former Presidents Presidential transition Administrative operations _ Category total _ Total distributed to programs above Deductions for offsetting receipts __-_ Total budget authority, General Services Administration. _ 1971 1970 95.3 287.3 1.7 134.2 298.1 1.9 217.3 325.2 2.0 384.3 434.2 544.5 63.6 1.1 1.7 2.8 67.3 1.2 1.9 3.9 67.5 1.2 1.9 3.9 69.2 74.3 74.5 13.2 5.8 .6 .7 14.8 6.9 .7 .8 14.8 7.9 .7 .8 20.2 23.1 24.2 2.5 .4 1.9 .1 .7 2.6 .5 2.0 .2 .7 2.5 .3 2.1 .2 .7 5.6 6.0 5.9 13.0 4.4 7.8 .8 .7 13.9 4.9 8.1 .7 13.3 4.9 11.1 1.1 .7 26.6 28.7 31.1 2.0 .3 .9 13.6 1.2 .3 1.2 14.7 15.4 16.8 16.2 16.9 522.8 -184.4 582.7 -214.8 697.1 -657.3 338.4 367.9 39.9 ].} .3 291 SPECIAL ANALYSES NATIONAL AERONAUTICS AND SPACE ADMINISTRATION The National Aeronautics and Space Administration is responsible for conducting research on flight problems both within and outside the earth's atmosphere. Space exploration with manned and unmanned vehicles is also conducted. Budget authority is distributed to the functions reflected in the program structure shown below. In 1971, additional funds are provided for earth orbital manned space flight to provide for the definition of a manned reusable earthto-orbit space shuttle and a semipermanent earth orbital space station. Lunar exploration funding requirements decrease due to completion of the expensive development phase of the Apollo lunar landing program and the planned suspension of the Saturn V launch vehicle and spacecraft production. Space applications requirements increase as efforts accelerate in such areas as synchronous meteorological satellites, earth resources technology satellites, and experiments in communications, navigation, geodesy, and traffic control. Table R-15. PROGRAM DISTRIBUTION OF BUDGET AUTHORITY NATIONAL AERONAUTICS AND SPACE ADMINISTRATION (in millions of dollars) Program category and subcategory Earth orbital manned space flight Lunar exploration Planetary exploration Astronomy Space physics Life sciences Space applications: Earth surveys Meteorology Communications and navigation 1969 actual 61.5 65.6 490.0 947.0 157.9 92.5 57.3 52.8 21.3 53.0 35.1 41.1 48.3 49.4 73.6 66.9 45.7 109.4 138.8 186.2 169.5 94.7 158.1 101.2 154.8 102.0 279.7 74.6 648.0 278.0 97.6 688.4 298.0 113.8 692.3 1,002.3 1,064.0 1,104.1 3,883.6 113.5 -6.2 3,858.4 3,344.6 -6.0 ""-14.6 3,990.9 3,734.9 3,330.0 ___ _ ___ Category total___ Space technology Aircraft technology Supporting activities: Tracking and data acquisition Other supporting activities Research and program management _ _ Total support activities Total, distributed to programs above Financing adjustments Deductions for offsetting receipts Total, budget authority, National Aeronautics and Space Administration 1971 estimate 328.6 1,674.2 178.3 97.6 51.6 66.0 141.4 2,017.8 110.3 111.1 _ 1970 estimate -117.5 VETERANS ADMINISTRATION The Veterans Administration provides a wide range of services for veterans and their dependents, such as income security, education, housing, and medical services. Income security accounts for over 70% of Veterans Administration budget authority. Major increases can be expected in future years as a result of the liberalizations of benefits and the impact of increased numbers of Vietnam war veterans. 292 THE BUDGET FOR FISCAL YEAR 1>971 The largest increase in budget authority for 1971 is in the Education, training, and rehabilitation category. This change is largely a response to the number of veterans of the Vietnam war who will enroll in higher and continuing education under the readjustment benefits program. The Housing programs of the Veterans Administration guarantee home loans and make direct loans to eligible veterans who lack access to private mortgage markets. In 1971, the number of loans guaranteed is expected to be 222,000, about the same as in 1970. There will be about 11,500 direct loans in 1971. Neither of these programs requires additional budget authority for 1971. Budget authority shown in this table under Housing is to finance interest insufficiencies on outstanding participation certificates. The concern of the Veterans Administration in Direct medical care is to administer efficiently the medical care it provides by stressing outpatient care, where possible, especially pre- and post-hospital care. Medical and prosthetic research is aimed primarily at the middle and older age groups which make up the bulk of VA patients. Table R-16. PROGRAM DISTRIBUTION OF BUDGET AUTHORITY VETERANS ADMINISTRATION (in millions of dollars) Program category and subcategory Income security: Compensation for veterans disabilities.. Compensation to survivors Other compensation Veterans pensions Survivors pensions Burial allowances and related benefits. _ Veterans life insurance trust funds Veterans life insurance revolving funds. Proposed for separate transmittal Category totalEducation, training, and rehabilitation: Readjustment education assistance to veterans Rehabilitative training of disabled veterans Educational assistance to dependents of deceased and disabled veterans Other benefits Proposed for separate transmittal Category total. Housing: Servicing and management of loans and properties . Category total Hospital and medical care: Direct medical care Medical and prosthetic research Research and development Education and training Medical support and miscellaneous services. Construction of facilities Proposed for separate transmittal Category total. 1969 actual 1970 estimate 2,141.2 534.6 3.5 1,315.3 847.7 2,208.0 532.4 3.9 1,292.5 904.7 68.6 73.9 767.1 757.7 3.9 1971 estimate 2,434.3 636.2 4.1 1,305.9 971.0 78.1 795.3 6.0 273.0 5.1 -106.0 5,672.5 6,061.6 6,124.0 638.4 30.2 668.6 38.7 990.4 41.3 41.8 9.9 51.3 9.6 223.3 63.1 11.3 90.0 720.3 991.5 1,196.1 9.5 6.2 6.3 9.5 6.2 6.3 1,375.6 48.1 1.8 79.1 36.5 11.9 1,520.4 57.7 2.8 92.4 39.2 73.2 1,580.9 59.3 2.8 99.8 42.2 66.5 -40.0 1,553.1 1,785.5 1.811.5 293 SPECIAL ANALYSES TablcR-16. PROGRAM DISTRIBUTION OF BUDGET AUTHORITY VETERANS ADMINISTRATION (in millions of dollars)—Continued Program category and subcategory Other veterans benefits and services: General operating expenses. _ Total distributed to programs above __ Deductions for offsetting receipts and intragovernmental transactions Total budget authority, Veterans Administration 1969 1970 206.5 8,161.9 236.7 9,081.5 239.2 9,377.1 -496.7 -486.0 -498.8 7,665.1 8,595.5 8,878.3 1971 NATIONAL SCIENCE FOUNDATION The fundamental purpose of the National Science Foundation is to aid the development of knowledge in rewarding fields of scientific endeavor. Funds are included to support basic research and education in the academic disciplines. Major emphasis will increasingly be placed on promoting activities where a new understanding is needed to help solve pressing societal problems, including those of the environment. This will involve multidisciplinary approaches. The Foundation's activities are reflected in the program structure shown below. Table R-17. PROGRAM DISTRIBUTION OF BUDGET AUTHORITY NATIONAL SCIENCE FOUNDATION (in millions of dollars) Program category and subcategory Support of scientific research: Scientific research project support Specialized research facilities and equipment National research programs National research centers Category total National Sea Grant program Computing activities in education and research Science information activities International cooperative scientific activities Institutional support of science Science education support Planning and policy studies Program development and management Total distributed to programs above Adjustment to budget authority, net Deductions for offsetting receipts Total budget authority, National Science Foundation. 1969 actual 1970 estimate 176.0 7.2 13.5 28.6 175.0 225.3 235.7 9.6 6.0 17.0 10.7 1.8 37.7 115.2 2.4 16.5 6.0 27.5 27.2 17.0 14.0 1971 estimate 191.0 6.2 59.0 37.1 293.3 13.0 15.0 14.0 121.7 2.5 19.5 2.2 55.5 96.9 2.9 20.5 432.6 463.4 513.3 -32.6 -2.2 -23.4 -1.1 -.3 -1.1 397.8 439.0 512.0 1.9 41.5 OFFICE OF ECONOMIC OPPORTUNITY The Office of Economic Opportunity is the major focus of innovative activity for social programs within the Federal Government. The 294 THE BUDGET FOR FISCAL YEAR 1971 principal means by which this overall objective is served are employment and education programs, health services, community betterment programs, and research and evaluation of social programs. In 1971, major increases are planned for improvement of individuals and families through health and education services, and a large relative increase is planned for research and evaluation, reflecting increasing emphasis on developing effective social programs. TableR-18. PROGRAM DISTRIBUTION OF BUDGET AUTHORITY OFFICE OF ECONOMIC OPPORTUNITY (in millions of dollars) 1969 actual Employment: Job training and work experience assistance _ Other employment assistance Category total Individual and family improvement: Compensatory and other educational assistance Health assistance Other individual and family assistance Category total Community betterment: Resource mobilization assistance Volunteer assistance _ _ Housing assistance __ Legal assistance Loan assistance Economic development assistance Other community betterment assistance _ __ _ ___ _ Category total Poverty research and evaluation: Research Evaluation Category total General support Proposed for separate transmittal Offsetting proprietary receipts__ _- _ _ __ __ Total budget authority, Office of Economic Opportunity-_ 1970 estimate 1971 estimate 701.4 23.5 602.5 23.5 611.8 23.5 724.9 626.0 635.3 606.4 98.0 11.2 599.0 134.5 22.2 627.3 180.5 40.8 715.6 755.7 848.6 266.1 32.8 12.3 45.4 6.0 24.9 71.6 267.9 37.0 15.7 54.9 10.0 33.0 63.2 273.3 39.0 17.4 61.0 5.0 34.0 61.6 459.1 481.7 491.3 31.5 3.7 55.6 13.0 70.0 19.0 35.2 68.6 89.0 12.9 16.0 -.4 _ 5 16.0 -662.0 -.4 1.947.3 1,947.5 1,457.8 SMALL BUSINESS ADMINISTRATION The Small Business Administration provides financial and managerial assistance to small businessmen and assists businessmen and homeowners adversely affected by disasters. Agency objectives are reflected in the agency's five program categories. However, budget authority does not reflect the true effects of the loan programs because proceeds from loan repayments can be reloaned without additional budget authority. The large increase in budget authority for 1971 will occur because receipts from prior lending and the sale of assets are not sufficient to fund 1971 lending programs. Program levels are shown in parentheses and show that the 1971 budget places a major emphasis on assistance to minority business 295 SPECIAL ANALYSES enterprises by increasing loans and loan guarantees to $270 million, an increase of 5 1 % over the preceding year. Loans and guarantees supporting programs for general economic growth constitutes the largest category, $373 million in fiscal year 1971. Small business loans and guarantees in deprived areas also show a modest increase, from $242 in 1970 to $265 in 1971. TableR-19. PROGRAM DISTRIBUTION OF BUDGET AUTHORITY SMALL BUSINESS ADMINISTRATION (in millions of dollars) 1969 actual Program category Stimulate small business in deprived areas * Program level2 Promote minority entrepreneurial opportunity * Program level2 Promote small business contributions to economic growth and competitive environment1 Program level2 Financial aid to victims of disasters or displacementl Program level2 General support Total budget authority, Small Business Administration. __ 1 2 1970 estimate 1971 estimate (194.7) (241.5) (86.3) (177.6) 70.2 (265.0) 90.6 (270.0) ~(263.~8J (52.0) 21.2 (338.2) 175.0 (295.0) 24.9 55.2 (373.0) 26.0 (96.0) 30.1 21.2 199.9 272.1 Budget authority reflects the effect of offsetting receipts. Program level includes direct and guaranteed loans. UNITED STATES INFORMATION AGENCY The United States Information Agency carries out informational programs overseas to further the goal of influencing public attitudes in other countries and to foster a better understanding of U.S. foreign policy objectives. The agency programs are carried out in 112 countries through a variety of communications techniques. The major program categories shown below are based on a subcategory buildup by country and the mix of the various media products used in each. The only major increase in 1971 is in Soviet Union and East Europe, for additional U.S. exhibits and other activities. Changes in the other regions are for wage and cost increases. The General support increase occurs primarily because of the requirement for an appropriation for activities supported from prior year balances in 1969 and 1970. Table R-20. PROGRAM DISTRIBUTION OF BUDGET AUTHORITY UNITED STATES INFORMATION AGENCY (in millions of doUars) 1969 actual Program category East Asia and Pacific Africa Near East and South Asia Latin America West Europe Soviet Union and East Europe General support _ Total distributed to programs above Deductions for offsetting receipts.. _ ; Total budget authority, United States Information Agency. 1970 estimate 1971 estimate 35.2 22.9 27.0 27.2 19.4 16.1 28.9 36.7 22.8 27.9 26.6 19.5 17.0 30.7 37.0 23.3 28.2 26.8 19.6 21.2 32.4 176.7 -.6 181.2 -.6 188.5 -.6 176.1 180.6 187.9